FINANCIAL BASICS: BONDS

Recall that a company can raise funds via either debt or equity. Let's say a company decides to borrow money and goes to the bank for a loan. The bank says they're unwilling to take on the risk themselves. What if, instead of borrowing $5 million from one entity (the bank) the company could borrow $1000 from 5,000 entities to raise its $5 million target? The company could do this by issuing 5,000 bonds certificates! All the holders of the bond certificates would receive their $1000 back, plus interest!