Funding facilities with bonds is a popular method for raising capital. Bonds are debt instruments, meaning the entity issuing them borrows money from investors in exchange for repayment of the principal plus interest at predetermined intervals. The strengths of funding facilities with bonds include access to larger amounts of capital and the ability to finance larger projects over long-term periods. Additionally, bonds offer a greater degree of liquidity than other debt instruments since they can be bought and sold on secondary markets (Khan et al., 2020). This gives issuers more flexibility when it comes to repaying or refinancing their debt obligations.

However, there are several potential drawbacks associated with using bond financing. First, firms must pay back both principal and interest payments which can add additional strain on financial resources if income generated isn’t sufficient enough to cover these costs (Khan et al., 2020). Moreover, because bondholders usually have priority status in case of default it puts equity holders at risk should such an event occur (Khan et al., 2020). Furthermore due to fixed periodic payments bond holders may not receive returns that reflect actual performance so their ability to realize profits may be limited (Lai & Yuen 2018).

Another disadvantage relates to credit ratings which can affect the cost as well as overall availability of funds provided by bond issuance(Andersen & Tufano 2017). Low ratings make it difficult for some companies particularly those without high levels established brand recognition such difficulty accessing funds could eventually lead bankruptcy Andersen Tufano 2017 . Therefore firms considering this option need ensure remain committed maintaining good ratings even during challenging times maintain access needed funds Andersen Tufano 2017