Loans or bonds? Financing as a tailored extension of corporate strategy
When a company defines its strategic roadmap, it must also establish the financial approach that will underpin its execution. In this context, bank loans and corporate bonds emerge as two often complementary avenues for supporting growth. Financial decision-making thus becomes a central pillar of strategy execution. Choosing between them, or combining both judiciously,is not merely a tactical move, but a strategic decision with profound implications for the company’s present and future development.
Every company, regardless of the strategy it pursues, must eventually define a financial structure that is consistent with its ambitions. Within this context, the choice between bank financing and capital markets funding is not so much a binary decision as a strategic one, shaped by a multitude of factors: the nature of the project, its time horizon, the company’s risk profile, its scale, and its willingness to be subject to external scrutiny. With these principles in mind, it becomes essential to understand the distinct characteristics of the two main avenues of corporate financing: bank loans and bonds issued on capital markets.
Loans and credit facilities—whether bilateral, syndicated, or structured as club deals—remain the most prevalent form of corporate financing. Through these arrangements, companies secure funding from financial institutions in exchange for interest payments. These instruments are highly adaptable and serve a variety of purposes: acquisitions, capital expenditure, working capital, general corporate uses, dividend payments, or standalone projects. Their main advantage lies in their flexibility: they allow for bespoke drawdown and repayment schedules, enable early repayment without penalty, permit renegotiation of terms throughout the life of the facility, and cater to a wide range of corporate profiles—from SMEs to large corporates, including family-owned businesses, private equity-backed firms, and listed companies. Moreover, they foster long-term relationships with banks which, in BBVA’s case, also offer strategic advisory services and ongoing support.
“Loans and credit lines offer versatile solutions that adapt to a wide variety of corporate profiles and funding needs. They also lay the foundation for lasting relationships between companies and banks, enabling robust support, long-term strategic alignment, and greater agility in executing key decisions,” explains Almudena López Blas, Head of IB&F at BBVA CIB for Iberia.
"Loans and credit lines lay the foundation for lasting relationships between companies and banks, enabling robust support, long-term strategic alignment, and greater agility in executing key decisions"
As an alternative, bond issuance is a highly effective means of raising funds in the capital markets, particularly over the long term. This instrument provides companies with direct access to institutional investors, such as asset managers and insurance companies, on the basis of repaying the principal at maturity along with fixed interest payments. Bonds are especially attractive to companies seeking greater freedom in managing cash flow, as they do not require interim repayments, thereby preserving liquidity throughout the life of the bond. Additionally, they are particularly suitable for issuers with lower credit ratings (BB+ or below), as they typically involve fewer collateral requirements and more lenient financial covenants. For this reason, bonds remain a viable option even in scenarios involving higher leverage or more complex financing needs.
Hybrid financing: building more resilient structures
Despite their differences, bank financing and capital markets funding should not be viewed as mutually exclusive. In fact, the most sophisticated and larger-scale companies combine both to construct more robust, diversified capital structures aligned with their growth strategies. This complementarity allows firms to fine-tune key variables such as maturity profiles, conditions, interest rates, risk exposure, and operational requirements.
“The key to sustainable corporate growth lies in the ability to diversify and optimise funding sources—harnessing the flexibility of bank financing alongside the long tenors and investor diversification offered by bonds,” notes Reyes Bover, Head of Debt Capital Markets Europe at BBVA CIB. “This approach not only broadens access to capital but also strengthens financial resilience through the cycle, with more balanced structures tailored to each company’s strategic profile".
"The key to sustainable corporate growth lies in the ability to diversify and optimise funding sources"
A particularly illustrative example can be found in acquisition financing. These transactions typically begin with a bridge loan—rapidly deployed, confidentially negotiated, and underwritten by one or more financial institutions—which enables the acquisition to be executed immediately. Once the transaction is complete, the bridge loan is refinanced through a bond issuance, when market conditions allow, providing greater stability and longer maturities. These structures often also include medium- and long-term loans to smooth the repayment profile, as well as credit lines to ensure access to liquidity at critical moments.
BBVA, through its Corporate & Investment Banking (CIB) division, works closely with companies to design bespoke financial solutions, combining technical expertise, strategic vision, and market insight. In doing so, the bank holds a leading position in Spain’s capital markets. Over the past year, BBVA ranked second in the combined league table for bonds and loans in Spain, remaining on the podium for three consecutive years.