Question

what are the important disadvantages of debt in practice?

Answer 1

1) the greater the leverage of the firm, the greater the likelihood of being in bankruptcy and incurring bankruptcy costs.

2) debt generates agency costs, such as the tendency of firms to take an excessive risk.

Answer 2

1. Some lenders might put restrictions on how the money should be used
   

2. Collateral may be necessary for some forms of debt financing

3. It can be expensive

4. You may need to meet qualification requirements