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What is the difference between financial debt and capital debt?
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The primary difference between financial debt and capital debt is the purpose of the loan. Financial debt is a loan that is acquired to cover the costs of everyday operations and expenses, such as inventory, payroll, or business expansion. Capital debt is a loan for the purpose of acquiring fixed assets, such as machinery, buildings, or land. Financial debt is typically a short-term debt, while capital debt is more often long-term. Financial debt carries a higher interest rate than capital debt, since the loan is for running operations.