A debenture is a debt obligation that is backed only by the creditworthiness of the issuer (borrower). It is a type of long-term business debt not secured by any collateral. Debentures are issued and documented by means of an agreement known as an indenture. These debt instruments are a form of debt capital. Unlike a typical loan, a debenture is negotiable- i.e., a debenture holder (the lender) can sell the debenture to another party. In this sense, it is a type of marketable security.)
A debenture is a type of unsecured long-term business loan, and hence, issuers need to be creditworthy and have a history of positive cash flow. The main types of debentures are:
