Floating Debt Law and Legal Definition
Floating debt is a short term debt that is continually refinanced, renewed, or rolled over to meet the ongoing operational requirements by the issuer. The main advantage of floating debt is a chance to benefit from reductions in interest rates. Moreover, the interest rates on long term debt are usually higher than interest rates on short term debt. Therefore, the company may save money by refinancing short term debt. However, the demerit of this process is that the company may incur loss, if interest rates rise and they have to refinance at a higher cost.