One
of the advantages of borrowed capital is that interest rate is low because the
debts are secured by the assets of the business. With sufficient capital, the potential
rate of the profit will be high. The profit rate is higher than the interest
rate from debt. Another advantage is that the interest from the borrowed
capital is considered as an expense. The interest from the debt is included as
an expense which is a deduction from the income. Thus, the income will be lesser
and the income tax will also be lowered.
