Debt financing involves raising capital by issuing debt instruments — loans, bonds, or notes — that must be repaid with interest over a defined period. Unlike equity, debt does not dilute ownership, but it creates fixed obligations that must be met irrespective of cash flow performance.
In private markets, debt financing is used both as the primary funding source for leveraged buyouts and as a standalone asset class for direct lending funds. Southeast Asia's private credit market has grown rapidly as banks have become more constrained, creating opportunities for non-bank lenders to provide senior secured loans, mezzanine debt, and unitranche facilities to mid-market companies.