ABE MAGAZINE | BUSINESS & FINANCE
October 26, 2026
Borrowing has long been an essential part of corporate growth. Businesses use debt to build factories, acquire competitors, develop products and finance investments that would otherwise take years to fund through earnings alone. Yet the financial environment surrounding corporate borrowing has changed significantly. As debt issued during periods of unusually low interest rates approaches maturity, companies are confronting higher financing costs, uncertain economic conditions and increasing pressure to demonstrate that their investments can generate sustainable returns. The growing concern is not simply how much businesses owe, but whether they can continue financing their obligations without sacrificing future growth.
Global Corporate Borrowing Has Reached Record Levels
Corporate debt has become one of the defining features of modern business finance. Large companies regularly issue bonds and arrange loans to support their operations, while smaller businesses depend on bank credit and other financing arrangements to purchase equipment, maintain inventory and manage working capital.
According to the Organisation for Economic Co-operation and Development’s Global Debt Report 2026, companies worldwide raised approximately US$13.7 trillion through corporate bonds and syndicated loans in 2025, the highest annual amount on record. Outstanding debt across these two markets reached approximately US$59.5 trillion by the end of the year.
The figures demonstrate the extraordinary importance of credit to the global economy. However, record borrowing activity does not automatically mean that companies are accumulating debt at an unsustainable pace. Some new financing replaces existing obligations, while other borrowing supports investments that may generate substantial future earnings.
The more important question concerns the relationship between debt, profitability and repayment capacity. A company with strong cash flow may comfortably manage billions of dollars in borrowing, while a smaller business with declining revenue could struggle under a much lower debt burden.
As financial conditions become more demanding, that distinction is becoming increasingly important for investors, lenders and corporate executives.
The Refinancing Challenge Is Moving Closer
One of the largest concerns facing businesses is the approaching maturity of debt issued when interest rates were considerably lower.
In September 2026, Reuters reported that approximately US$4.3 trillion in non-financial corporate bonds issued in American markets would mature between 2027 and 2031, according to an analysis of LSEG data. Annual maturities are expected to increase from roughly US$572 billion in 2027 to approximately US$1.03 trillion in 2030.
When a bond reaches maturity, the issuing company must repay the amount borrowed. Some businesses have sufficient cash reserves to meet these obligations directly, but many choose to refinance by issuing new bonds or arranging replacement loans.
The difficulty arises when the replacement financing carries a higher interest rate than the original debt.
Consider a company that borrowed US$500 million at an annual interest rate of 3%. Its annual interest expense would be approximately US$15 million. If the same company refinanced that debt at 7%, annual interest costs would increase to US$35 million. The additional US$20 million would reduce the financial resources available for other purposes, assuming the principal remained unchanged.
That money might otherwise have supported employee recruitment, research, equipment purchases or expansion into new markets.
The refinancing problem is therefore not limited to whether companies can repay their debts. It also concerns how much financial flexibility remains after they have done so.
Why Some Businesses Face Greater Risks Than Others
Corporate borrowers do not enter the refinancing cycle from equal financial positions.
Companies with investment-grade credit ratings generally have stronger access to capital markets and may be able to obtain financing on comparatively favourable terms. Businesses with substantial cash reserves and predictable earnings can also reduce borrowing or repay obligations without immediately seeking replacement financing.
Lower-rated companies face greater uncertainty. Investors typically demand higher interest rates from borrowers considered more likely to default, and those financing costs can rise sharply when market confidence deteriorates.
The OECD reports that 24% of outstanding investment-grade corporate debt and 31% of non-investment-grade debt, measured at the end of 2025, is scheduled to mature during the following three years. Much of that debt carries interest rates below those available on newer financing.
This creates a particular challenge for businesses already operating with narrow profit margins. A company may remain capable of meeting its existing interest payments but become financially vulnerable when those payments increase after refinancing.
At the same time, the broader corporate debt market has shown resilience. Credit spreads, which measure the additional yield investors demand over safer benchmark debt, have remained relatively narrow in several markets. This suggests that investors have not treated corporate borrowing as an immediate, widespread crisis.
The danger is more concentrated. Financially weaker companies may experience severe pressure even while stronger corporations continue to borrow successfully.
Higher Debt Costs Can Change Business Decisions
The consequences of expensive borrowing extend beyond financial statements. Debt servicing influences how companies allocate capital and evaluate investment opportunities.
A manufacturer considering a new production facility must compare the expected earnings from the investment with the cost of financing construction and equipment. If borrowing becomes more expensive, a project that once appeared profitable may no longer justify its financial risks.
Retailers face similar decisions when opening new locations. Expansion requires spending on commercial property, inventory, technology and staffing before the new stores generate meaningful revenue. Higher interest expenses can lengthen the period required to recover those investments.
Smaller businesses may experience the effects through bank loans and credit facilities rather than publicly traded bonds. An independent logistics company financing vehicles or a restaurant borrowing to renovate its premises must ensure that future revenue can support repayment obligations.
These decisions matter to the wider economy because business investment contributes to employment, productivity and long-term economic growth.
If companies devote a growing share of their earnings to interest payments, they may reduce investment even when profitable commercial opportunities remain available.
The OECD has warned that rising refinancing requirements and tighter financial conditions could constrain corporate investment and amplify economic weakness, particularly if growth slows.
Private Credit Adds Complexity to Corporate Financing
The structure of business lending is also changing.
Private credit has become an increasingly important alternative to traditional bank lending and publicly traded bonds. In these arrangements, investment funds and other nonbank lenders provide financing directly to companies, often through negotiated agreements.
For borrowers, private credit can offer flexibility and access to capital when conventional financing is difficult to obtain. It can also provide funding for acquisitions, restructuring and businesses with specialized financial requirements.
However, private lending arrangements can be less transparent than publicly traded debt. Loans may be difficult to sell quickly, and valuations can depend on financial models rather than frequent market transactions.
Some borrowers may also negotiate arrangements that allow interest to accumulate instead of being paid immediately in cash. While such provisions can provide temporary financial relief, they may increase the amount owed over time.
The International Monetary Fund’s October 2026 Global Financial Stability Report identified rising leverage and potential liquidity pressures in private credit as vulnerabilities that could intensify market stress.
This does not mean that private credit is inherently unsafe. It does mean that the growth of nonbank lending requires careful attention to transparency, risk concentration and the ability of lenders to manage unexpected losses.
Technology Investment Is Creating New Demand for Debt
Corporate borrowing is no longer driven only by traditional industries such as manufacturing, transportation and property development.
Major technology companies are investing enormous sums in computing infrastructure, data centres, energy systems and equipment required for advanced digital services. These projects demand substantial capital, often years before their full commercial potential can be evaluated.
The OECD estimates that nine major technology companies could collectively spend approximately US$4.1 trillion on capital investment between 2026 and 2030. The organization also reported that these companies issued US$122 billion in bonds during 2025, demonstrating their growing participation in corporate debt markets.
Large technology companies may possess considerable cash reserves and stronger financial positions than many highly leveraged borrowers. Nevertheless, the scale of their investment programmes raises questions about future financing requirements and whether expected revenues will justify the costs.
If businesses invest heavily in infrastructure based on optimistic assumptions about future demand, disappointing commercial returns could make their financial obligations more difficult to manage.
The IMF has warned that weaker-than-expected returns on artificial-intelligence investment could contribute to financial-market corrections, particularly where leverage and concentrated exposures amplify losses.
The broader lesson extends beyond technology. Borrowing can accelerate investment, but financial commitments remain even when anticipated business opportunities develop more slowly than expected.
Financial Pressure Can Spread Through Supply Chains
Corporate debt problems rarely remain confined to individual companies.
When a major business reduces investment or production to preserve cash, the effects can spread to suppliers, contractors and service providers. A manufacturer delaying expansion may purchase less equipment, while a retailer reducing store openings may cancel construction projects or lower inventory orders.
Financially stressed businesses may also take longer to pay suppliers, creating cash-flow difficulties for smaller companies that depend on those payments.
These relationships demonstrate why corporate debt matters even to businesses that carry relatively little borrowing themselves. A financially disciplined supplier can still experience difficulties if a major customer becomes unable to meet its obligations.
Lenders and investors can also be affected. If corporate defaults increase, banks and investment funds may become more cautious, making financing more expensive or difficult to obtain for otherwise healthy businesses.
The resulting cycle can weaken investment, employment and economic confidence.
This is one reason financial authorities monitor corporate debt alongside broader economic indicators. The concern is not simply the possibility of individual business failures, but whether widespread repayment difficulties could amplify an economic downturn.
Why Financial Discipline Matters More Than Ever
The approaching refinancing cycle reinforces the importance of managing debt as a long-term financial responsibility rather than a temporary source of available capital.
Businesses need to understand when their obligations mature, how much interest they currently pay and how their financial position would change if replacement financing became more expensive.
Companies may reduce vulnerability by maintaining adequate cash reserves, avoiding excessive short-term borrowing and ensuring that major investments are supported by realistic revenue expectations.
Strong financial planning also requires evaluating risks that may not be visible during periods of economic growth. Customer demand can weaken, operating expenses can increase and lenders may become more cautious precisely when businesses need financing most.
None of these considerations means that companies should avoid borrowing altogether. Debt remains essential to productive investment and economic development.
The objective is to use borrowed capital in ways that strengthen a business without making its survival dependent on permanently favourable financial conditions.
THE ABE TAKE: The Real Risk Is Borrowing Without Financial Resilience
The growing concern surrounding corporate debt reflects a fundamental change in the financial environment facing businesses.
For years, relatively inexpensive financing allowed many companies to expand, refinance existing obligations and invest in long-term projects. As those debts approach maturity, businesses must demonstrate that their operations can support borrowing under less favourable conditions.
The greatest risks are likely to emerge among companies with weak cash flow, excessive leverage or investment strategies dependent on continued access to inexpensive capital.
Yet the refinancing cycle should not be interpreted as evidence that corporate borrowing has become fundamentally unsustainable. Many companies remain financially strong, and debt markets continue to provide essential capital for productive economic activity.
For investors, the important questions concern repayment schedules, profitability, financial reserves and the quality of the investments financed through borrowing.
For entrepreneurs, the lesson is that expansion should be supported by financial resilience. A company that grows rapidly through borrowed money may appear successful, but its long-term strength depends on whether it can meet its obligations when economic conditions change.
Ultimately, corporate debt becomes dangerous when borrowing substitutes for sustainable earnings rather than supporting them.
The businesses best positioned for the coming years may not be those that borrow the most, but those that use capital carefully, maintain financial flexibility and remain capable of investing even when credit becomes more expensive.
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