loan capital

  

Definition

The part of a company's capital employed that is (1) not equity capital, (2) earns a fixed rate of interest instead of dividends, and (3) must be repaid within a specified period, irrespective of the company's financial position.

Loan capital may be obtained from a bank or finance company as long-term loans, or from debt-equity investors in the form of debentures or preferred stock (preference shares), and is usually secured by a fixed and/or floating charge on the company's assets. Unlike debt capital, it does not include short-term loans (such as overdraft). Also called borrowed capital.

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