Corporate bonds are debt securities that enterprises issue to raise capitals. Private companies and Public corporations issue corporate bonds ensuring fixed returns to the investors.  These debt instruments works as a loan that borrowers repay after a fixed term.

The company that issues bond termed as the “issuer”. On purchasing a corporate bond, you lend money to the issuing company and the company promises to return your money, the “principal” amount on a specific maturity date. 

On purchasing a corporate bond buyer does not own a stake or have an ownership interest in the company, only gets an acknowledgment of debt from the company. 

In simple terms purchasing corporate bond means, offering a loan to the company to perform its operations, under a legal contract the company repays the borrowed money.  Corporate bonds offer a higher rate of interest than government bonds.