What is a disadvantage of debt financing that relates to the terms of the loan?

The choice highlighting that regular payments must be made captures a significant disadvantage of debt financing. When a business takes on debt, it agrees to pay back the borrowed amount over a specified period, which includes the obligation to make consistent repayments, often on a monthly basis. This requirement creates a financial burden, as the business must ensure it generates sufficient cash flow to meet these fixed obligations regardless of its profit levels or operational circumstances.

This aspect can affect a company's overall financial stability; during times of low revenue or unexpected expenses, meeting these regular payment obligations might strain cash flow, leading to potential financial distress or even default on the loan.

In contrast, the other choices emphasize benefits rather than disadvantages. Flexible repayment terms allow a business to manage payments more effectively, no collateral required offers less risk in terms of assets, and immediate access to cash provides instant funding for business needs. However, the necessity of making regular payments underscores the pressure that debt financing can place on a company's finances over time.