Loans or bonds amid the global recession?

CORPORATE loans are theoretically more expensive because the risk is taken up by only one counter-party. With bonds, the risk is spread among many lenders. The stronger the lender’s cashflow, the more flexibility he has in being able to lend at a cheaper rate.

Bonds normally come with standard clauses that leave issuing companies with more latitude. For instance, if investors think that the risk they are undertaking is manageable, they may be willing to lend at a cheaper rate. Previously, borrowers went to the bond markets as they were able to obtain longer-term fixed interest rates, as well as long-term rates that were often lower than bank loan rates.