When should a company consider issuing debt instead of equity?

There are many reasons to issue debt instead of equity:

1. It is a less risky and cheaper source of financing compared to issuing equity; 2. If the company has taxable income, issuing debt provides the benefit of tax shields;

3. If the firm has immediately steady cash flows and is able to make its interest payments;

4. Higher financial leverage helps maximize the return on invested capital;

5. when issuing debt yields a lower weighted cost of capital (WACC) than issuing equity.