This document provides an overview of different types of debt securities including term loans, leases, debentures, and bonds. Term loans are monetary loans repaid with regular payments over a set time. Leases are contractual agreements where one party owns an asset and allows another party to use it for a period in exchange for periodic payments. Debentures are debt instruments issued by companies that offer to pay interest on borrowed money. Bonds are debt investments where an investor loans money to an entity for a defined period at a fixed interest rate.

1. A
Presentation
on
“Types of debt
Security”
Presented by:
Patel Lalji (KIM-MBA-10-329)

2. Introduction
 What is security?
 A security is a negotiable financial instrument. Negotiability
refers to the fact that its legal ownership is readily capable of
being transferred from one owner to another by delivery or
endorsement.
 What is debt security?
 A debt security is a negotiable financial instrument serving as
indication of a debt.

3. Types of Debt Security
Types of
Debt
security
Term loans Lease Debentures Bonds

4. A. Term Loans
 A term loan is a monetary loan that is repaid in regular payments
over a set period of time.
 Term loans can be given on an individual basis but are often used
for small business loans.
 Term loan purpose can be new industrial units, expansion,
purchase second hand machinery.
 Term loans are a good way of quickly increasing capital in order
to raise a business supply capabilities or range.
 Term loan is whether the interest rate is fixed or floating.
 Institutions offer a variety of repayment plans for your term loan.

5.  SME TERM LOANS (BOB)
 ELIGIBILITY CRITERIA
 Satisfactory credit rating for the last three years
 Latest Balance Sheet etc. should be available.
 Satisfactory financial performance in terms of Sales/turnover
and profits. Negative variance, if any, should not be more
than 10%.
 Total Debt-equity ratio should not be higher than 4.5:1 and
total Term Liability and equity ratio should not be more than
3:1
 LOAN AMOUNT:
 Upto 25% of the existing fund based Working capital limits.
 Minimum of Rs. 25 Lakhs and maximum of Rs. 500 Lakhs.

6. B. Lease
 A lease is defined as a contractual arrangement in which a
party owning an asset (lessor) provides the asset for use to
another or transfer the right to use the equipment to the user
(lessee) for an agreed period of time for return for periodic
payments (lease rentals).
 Property may be obtained by leasing, such as
 Motor vehicles,
 Buildings,
 Construction equipment,
 Computers,
 Aircrafts,
 Ships and other office equipment.

7. Essential Elements
1. Parties to contract
2. Assets
3. Ownership Separate from User
4. Term of lease
5. Lease Rental
Types of Leasing
1. Operating lease
2. Financial lease
3. Sale and lease back
4. Leveraged lease

8. C. Debenture
 A Debenture is a debt security issued by a company (called the
Issuer), which offers to pay interest of the money borrowed for
a certain period.
 These are long‐term debt instruments Issued by Private Sector
Companies.
 These are issued in denominations as low as Rs. 1000 and
have maturities ranging between one and ten years.
 Debentures were issued in physical form. Now
corporate/PSUs have started issuing debentures in Demat
form.
 Debentures can be listed on a stock exchange, giving you an
opportunity to sell them and exit earlier then the maturity of
the debenture.

9. Types of debentures
 Basis of convertibility:
I. Non convertible debenture
II. Convertible debenture
 Basis of security:
I. Secured debenture
II. Unsecured debenture
 Basis of redemption:
I. Redeemable debenture
II. Non redeemable debenture

10. D. Bond
 A debt investment in which an investor loans money to an
entity (corporate or governmental) that borrows the funds for
a defined period of time at a fixed interest rate.
 Bonds are used by companies, municipalities, states and
foreign governments to finance a variety of projects and
activities.
 Bonds are referred to as fixed-income securities.
 Interest on bonds is usually paid every six months

11.  Type of bonds
 Classification basis of maturity
1. Callable bond
2. Puttable bond
3. Convertible bond
 Classification basis of principal repayment
1. Amortizing bond
2. Bond with sinking fund provision
 Classification basis of coupon
1. Zero coupon rate bond
2. Floating rate bond