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Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)

The process of converting the floating indebtedness of a government or political subdivision thereof, or a business corporation, into long-term debt.  Funding may be accomplished by converting a series of short-term note issues into long-term bonds when interest rates are low or, in corporate finance, by selling stock and paying off short-term debts with the proceeds.  In this way stockholders virtually buy out the interest of the creditors.  Funding by means of the sale of additional stock is usually undertaken when the equity market is favorable.

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