Hi, I’m Ann Zuraw. Welcome back to Chicks Chat and Change. Today we’re going to talk about bonds and continue our Financial Terminology 101 class.
If you need cash for only a specific time you might offer bonds. A bond is a debt investment with which an investor would loan money to your cake business in exchange for interest payments usually paid twice per year. These funds are borrowed for a specific period of time and at a specified interest rate. The bond owner does not own an actual piece of your business and isn’t able to vote at shareholders’ meetings.
For example, if you sold a bond for $100, and got a guaranteed interest rate for 5-years, the investors will expect to get their $100 back at the end of that 5-years plus interest. Bonds are subject to market and interest rate risks if sold prior to maturity. Bond values and yields will decline as interest rates rise and bonds are subject to availiabilty and change in price.
When a bond reaches the end of the specified time or what they refer to as when the bond “matures”, your cake company would have to pay back all of the money the investor loaned it and the interest payments now stops and the bond owner is no longer involved with your cake business.
Sweet Concept – Isn’t it?
Thanks for listening