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Simple English definitions for legal terms
funded debt
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A quick definition of funded debt:
Funded debt is money that someone owes and has agreed to pay back. It can be a debt owed to a person, entity, or government. Funded debt can be secured by collateral or backed by the full faith and credit of the debtor. It can be short-term or long-term, and can be paid off through future taxation or an accumulation of money.A more thorough explanation:
Funded debt is a type of debt that is secured by a bond or debenture and is meant to replace short-term, floating, or unsecured debt. It can also refer to a state or municipal debt that will be paid out of an accumulation of money or by future taxation.
- A company issues bonds to raise money for a new project. The bonds are secured by the company's assets and are considered funded debt.
- A city issues municipal bonds to finance a new stadium. The bonds will be paid back over a period of years and are considered funded debt.
These examples illustrate how funded debt is a long-term debt that is secured by a bond or debenture and is meant to replace short-term, floating, or unsecured debt. It is a way for companies and governments to raise money for large projects or expenses that they cannot pay for upfront.