Definition of Financing cost

Definition of Financing cost

Financing cost are also known as “finance costs” and “borrowing costs”. Companies fund their functions either through value financing or through borrowings and loans.

These resources do not come for free. The suppliers of resources want an incentive for against their resources. The value suppliers want benefits and capital benefits. The suppliers of loans seek attention rates. Interest price is the price of obtaining loans and borrowings.


Brief Explanation of Financing cost

Financing costs are usually recognized to be referred to attention expenses. Usually, they are thought to make reference to attention price on short-term borrowings, for example, bank overdraft account and notices due. The long-term borrowings, for example, phrase loans and property loans. The word “Financing costs” is wider and also includes expenses other than just attention price. Finance expenses also include:

  • Exchange variations as a result of foreign currency borrowings to the extent that they are regarded as modification to the eye cost
  • Amortization of additional expenses suffered in connection with the borrowings or arrangements
  • Amortization of discount rates or rates that are related to the borrowings
  • Finance charges in respect of the fund leases


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