Corporate finance is a broad concept and entails a wide range of activities. Companies and government entities need to have a robust corporate finance strategy. Without an efficient corporate finance strategy, an organisation might fail to raise funds. There are multiple ways for an organisation to raise funds, from launching an IPO to applying for a bank loan. Among all the funding sources, DCMs (Debt Capital Markets) are the preferred choice for many corporate and government entities. Organisations often depend on investment and corporate banks to issue securities in debt capital markets and raise funds. Read on to understand how DCM solutions are transforming debt capital markets.
Understanding debt capital markets and DCM solutions
A debt capital market is a place for corporate and government entities to raise funds. It all starts with issuing debt securities in a debt capital market and attracting investors. Bonds, notes, commercial papers, ABS (Asset-backed Securities), CDOs (Collateralised Debt Obligations), convertible bonds, and Eurobonds are a few debt securities issued in debt capital markets. By issuing securities in a debt capital market, a company can get an influx of funds. It is much better than seeking a loan from a traditional bank. By issuing debt securities, you can secure more funds as compared to bank loans. Also, you will have access to multiple large-scale investors via debt capital markets.
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Investors buying debt securities provide an influx of capital to the issuer. In exchange for funds, the issuer will pay a fixed/floating interest to the investor. The interest is usually paid by the issuer throughout the tenure of the debt. To issue flexible debt securities in debt capital markets and find potential investors, organisations rely on corporate banks, specialist advisory firms, and investment banks. Banks and advisory firms help companies with bond issuance, underwriting, due diligence, and many other debt capital market processes. However, these banks and advisory firms might also require third-party support to satisfy their client’s needs. It is where DCM Solutions come into the picture for DCM service providers.
Debt capital market solutions refer to the services offered by third parties for success in corporate finance. Corporate and government entities can directly seek third-party services for success in debt capital markets. On the other hand, banks and advisory firms can also look for DCM services to help their clients raise funds by issuing debt securities. These services include debt structuring, underwriting, issuance, capital structure analysis, benchmarking, credit positioning, and more. To offer DCM services, third parties might depend on several digital solutions. These digital solutions can enhance the research and analysis process for debt issuance and corporate finance.
Here are some digital DCM solutions used widely by third parties offering DCM support:
- Bond trading platforms to buy and sell securities in debt capital markets
- Digital auction platforms to auction debt securities in the market
- Data analytics solutions for generating rich insights
- Due diligence solutions for investor research
- Reporting platforms for providing well-curated reports to investors and issuers
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Role of DCM Solutions in transforming debt capital markets
Here’s how DCM support and solutions are transforming debt capital markets:
- DCM support enables corporate entities to issue flexible debt securities in debt capital markets. Also, organisations are raising funds easily with the help of third-party DCM support.
- Several automated digital solutions have increased the efficiency of DCM processes. Manual labour involved in underwriting, debt issuance, and other processes has been decreased.
- Debt capital market solutions have increased the transparency in financial markets for companies. Organisations can now identify potential debt capital markets that can offer a large pool of capital. With the help of DCM support, debt is more accessible for companies, irrespective of their size.
- DCM solutions have improved the risk management process for issuers. Third parties offering DCM support can identify the risks that can deprive the funding chances of their clients.
- With the help of third-party DCM services, companies are exploring new and flexible debt securities. For example, some companies have started issuing green bonds to attract investors.
In a nutshell
DCM support can help corporate entities leverage the power of debt capital markets. Banks and advisory firms can also satisfy their clients with DCM support. You can choose Acuity Knowledge Partners for reliable DCM support at reasonable rates. Explore the possibilities in debt capital markets now!