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Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate agency costs?

I and the management happen to raise funds from financiers. Raising funds through lending is one of the sources of funds for any company. The rising of funds through borrowing from outsiders may result in agency cost of debt. Agency cost of debt refers to the disagreement of interest among shareholders and creditors or debt holders of the company on the basis of management decisions.

Agency cost of debt also includes the creditors dictating what the firm is to do with the capital they have offered the company if they feel that the management is making decisions in favor of the shareholders. Agency costs can be mitigated through proper planning of the budget, maintenance of accounting principles, and limiting business expenses.

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Academic.Tips. (2023) 'Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate agency costs'. 11 March.

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Academic.Tips. (2023, March 11). Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate agency costs? https://academic.tips/question/suppose-your-company-raises-funds-from-outside-lenders-what-type-of-agency-costs-might-occur-how-might-lenders-mitigate-agency-costs/

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Academic.Tips. 2023. "Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate agency costs?" March 11, 2023. https://academic.tips/question/suppose-your-company-raises-funds-from-outside-lenders-what-type-of-agency-costs-might-occur-how-might-lenders-mitigate-agency-costs/.

1. Academic.Tips. "Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate agency costs?" March 11, 2023. https://academic.tips/question/suppose-your-company-raises-funds-from-outside-lenders-what-type-of-agency-costs-might-occur-how-might-lenders-mitigate-agency-costs/.


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Academic.Tips. "Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate agency costs?" March 11, 2023. https://academic.tips/question/suppose-your-company-raises-funds-from-outside-lenders-what-type-of-agency-costs-might-occur-how-might-lenders-mitigate-agency-costs/.

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"Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate agency costs?" Academic.Tips, 11 Mar. 2023, academic.tips/question/suppose-your-company-raises-funds-from-outside-lenders-what-type-of-agency-costs-might-occur-how-might-lenders-mitigate-agency-costs/.

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