13 Disadvantages Of Debentures

1. Payment of interest on debenture is obligatory and hence it becomes burden if the company incurs loss. 2. Restrictions imposed by securing the debenture with an asset or asset class, takes away the management’s freedom to control or use the assets at will.  3.  The main disadvantage of preferring debenture over equities is that the debenture holder does not get right to vote and there is no profit sharing. 4. Requires huge Fixed Assets: Most of the debentures are secured. So companies with less fixed assets cannot raise money through debentures. 5.  A company cannot raise further loans against the security of assets already mortgaged to debenture-holders. 6. Debenture financing enhances the financial risk. 7.  Redemption of debenture involves a larger amount of cash outflow.