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Debt financing is the process of raising funds by borrowing money from lenders, such as banks or bondholders, with a legal obligation to repay the principal plus interest over a specified period. This method allows companies and individuals to access capital without surrendering ownership stakes, making it a flexible tool for growth, though it increases financial risk if cash flows falter. In today's economy, it's widely used by businesses for strategic expansions, acquisitions, or operations, contrasting with equity financing by prioritizing debt repayment over profit sharing.
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