floating debt
Definition
Continuously refinanced short-term debt for a company's ongoing operations. The advantage of floating debt is that there is a chance to benefit from reductions in interest rates. In addition, interest rates on long-term debt are often higher than interest rates on short-term debt, so the company might be saving itself money by refinancing short-term debt as opposed to borrowing long-term. However, the downside is that the company might suffer if interest rates rise and they have to refinance at a higher cost.
Use floating debt in a sentence
“ You should always know how much floating debt you have and be working hard to pay it off as soon as possible. ”
“ Our company CEO was arrested for misappropriating funds that he skimmed off the top of the company's floating debt we refinanced each month. ”
“ Our company has a lot of floating debt, mainly due to the recent acquisitions we have made. On average we purchase one to two companies a year. ”
