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At a meeting with a financial advisor, the use of bonds was strongly recommended over bank...

At a meeting with a financial advisor, the use of bonds was strongly recommended over bank loans as a source of debt finance for a project. What may explain the financial advisor’s position on the source of debt?

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Raising debt from the market provides a company with greater freedom of operation as the investor pool is large and diversified and they cannot put terms and conditions for the loans given. Taking a loan from the bank, however, means more oversight and monitoring from the bank which can restrict the freedom of a company to operate. Also, given that capital markets host a large number of potential investors compared to a bank giving a loan, the interest rate on bonds is usually lower than the interest rate on a bank loan.

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