Quora Answer: Why Would a Company Prefer to Raise Capital by Issuing Debt Instead of New Equity?

The following is my answer to a Quora question: “Why would a company prefer to raise capital by issuing debt instead of issuing new equity?” 

If a company is confident of its cashflow, and has an established revenue stream, issuing debt is always preferable to issuing new equity, and is a lot cheaper.  Debt has a fixed cost, which is amortised over an extended period, and can be planned for. 

New equity, on the other hand, not only means giving up some control of the company, but may also be more expensive in that same period, with the issuance of dividends per share.  There is also the consideration that the business might want to buy back some of those shares eventually, which is a lot more expensive than simply paying off the yield on a bond.