TLDR:
A debenture is a type of long-term debt instrument issued by corporations or governments that is backed only by the creditworthiness and reputation of the issuer, not by physical assets.
Debentures vs. Secured Bonds
The key distinction between a debenture and a secured bond is the presence or absence of specific collateral. A secured bond is backed by specific assets (real estate, equipment, receivables) that the bondholder can claim in default. A debenture relies entirely on the issuer’s creditworthiness — making it inherently riskier for investors but less restrictive for issuers who don’t want to pledge specific assets.
Relevance for Startups
While mature companies routinely issue debentures to raise debt capital, early-stage startups typically cannot access debenture markets because they lack the credit history and investor recognition needed.