From a firm's point of view, how isla bond similar to a bank loan? How are they different?

A bond is a fixed income instrument representing a loan made by an investor to a borrower (typically corporate or governmental). From a firm's perspective, when it issues a bond, it's essentially borrowing money from the bondholder (investor) with an agreement to pay back the money with interest over time. The firm is obligated to pay the investor a set number of interest payments at a predetermined interest rate (also known as the coupon rate), and to return the face value of the bond (principal) on a specific date (maturity date).

A bank loan, on the other hand, is a sum of money loaned from a bank. The firm that takes out the loan becomes indebted to the bank and is obligated to pay back the principal amount, plus interest, over an agreed-upon timeline.

Both bank loans and bonds represent a borrowing arrangement for a firm. The firm is obligated to pay back the borrowed amount with interest over time. They both represent the indebtedness of the firm, and in both cases, the firm is obligated to make periodic payments (interest) until the full amount (principal) is repaid by a certain date.

While both being debt instruments, there are some key differences. Firstly, the lenders. In the case of a bond, the lenders can be a wide range of investors, whereas for a bank loan, the lender is typically a single financial institution. Secondly, the liquidity of these two instruments is different. Bonds can be bought and sold in the secondary market, providing a level of liquidity to the bondholder, unlike a bank loan which is less liquid as it's not typically resold. Finally, there can be differences in the cost of borrowing. The interest rate on a bond can be lower if the firm has an excellent credit rating since the risk is spread amongst many bondholders. On the contrary, a bank loan might have a higher interest rate, as the risk is borne solely by the bank.