Funded debt

Funded debt refers to the long-term portion of a corporation's borrowings — debt obligations with maturities of more than one year. The category covers corporate bonds, debentures, and long-term notes: the financing a company raises for durable purposes like building plants, acquiring businesses, or refinancing other obligations.

The "funded" label comes from the idea that this debt is a permanent part of the company's capital structure, funded over a long horizon rather than rolled over month to month. It stands in contrast to short-term or "unfunded" borrowing — commercial paper, bank lines, and other money market instruments that mature in a year or less and typically cover working capital needs.

Analysts care about funded debt because it shapes a company's long-run financial risk. Funded debt appears in leverage measures such as the ratio of long-term debt to total capitalization, and interest on it is a fixed charge the company must cover in good years and bad. A company can also "refund" its funded debt — issue new bonds to pay off old ones, much like refinancing a mortgage — often to lock in lower interest rates.

For exam purposes, funded debt appears in the corporate debt chapters of the Series 6, Series 65, and Series 66 materials. Know the simple definition — corporate long-term debt, maturing in more than a year — and be able to distinguish it from money market borrowing on a question about types of corporate securities.