Debt Financing functions much like a private business loan where the company sells a promissory note to investors. The note sets forth the terms and conditions of the loan arrangement between the company and the investor. Thus a note would provide a certain interest rate typically paid annually to investors with a maturity date that dictates when the principal is paid back in full to investors. The notes are sold in fractional amounts providing flexibility for accommodating investors - thus a typical debt offering for $100,000 would be the sale of 20 notes at $5,000 per note. An investor investing $10,000 would get two notes. If the interest rate was 12% then he would get $1,200 paid to him annually based on the $10,000 investment. If the maturity date was 36 months then at the end of the 36 months the company would pay back the $10,000 to the investor. Many early stage companies that lack the required equity or operating history for conventional bank financing will use private debt from investors for a short period of time (12-36 months) to establish a credit and operating history. They then have the capability to take out the private debt loan from the investors with a standard bank business loan at a lower interest rate.