When you are trying to put together financing, or a capital structure, for your business firm, using debt financing should be one of your first considerations.Why? Debt is the cheapest form of financing, usually far cheaper than financing with equity or funds contributed by investors in your firm.

Even though debt financing raises the risk of your company, the risk of debt financing is offset by the benefit of using debt financing, at least up to a point.You should compare the amount of debt financing in your industry, in general, to the debt financing you want to use in your company. If you use too much debt financing, then you run the risk of bankruptcy.

A real benefit of financing your company's operations with debt is that the interest you pay on debt is tax-deductible, which contributes to the fact that debt is more inexpensive than equity.