Therefore, cost of borrowing is fundamentally the nature of debt financing, which mostly hinges on prevailing interest rates. Normally, debt financing will occur when business generates capital though loans, bonds, and any other form of debt instrument which is repaid with an interest payment. The interest rate that a country’s central bank set up-for example, the Federal Reserve in the United States or the European Central Bank-decides the borrowing rate of the companies.
High Interest Rates:
High interest rates make the cost of borrowing very expensive. Companies have to pay high interes
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