What is a debt instrument?

Debt instrument enable investors to invest into a company and receive a fixed return over a set period of time, with the initial investment returned at the end of the prescribed duration.

Debt instrument allow you to lend money directly to businesses. They are in effect IOUs which the companies sell to investors.

Typically they have terms of three to five years, and investors earn regular interest payments during the life of the debt instrument. At the end of the term, the investors typically receive back their initial investment plus a lump sum of interest, although some bonds offer rewards in another form such as discounts of their product.

Over the past few years, companies as diverse as Hotel Chocolat, Naked Wines and John Lewis have issued debt instrument to as a way of securing debt-based finance.

The current increase in popularity of debt instrument stems from the recent financial crisis, which saw many smaller companies unable to raise capital from banks. Instead, some turned to equity crowdfunding to raise funds, while others began to offer debt instrument directly to the public.

Given the current poor rate of return on savings, many investors have welcomed the opportunities that debt instrument present. The promised returns are usually considerably more than those offered by a standard bank or building society savings account. Plus, some companies offer innovative ways to pay returns to their customers – Hotel Chocolat’s return included monthly chocolate box selections for investors.

Why Invest in debt instrument?

  • Have the option to receive income or capital growth
  • Fixed rates of return so investors know what the potential return will be.
  • Fixed terms typically up to 5 years.
  • Some have a charge against the assests providing a level of security.

The information available through Tbc Consultants Ltd is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by Tbc Consultants Ltd and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.

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