Financing Costs Definition

Financing costs are defined as the interest and other costs incurred by
the Company while borrowing funds. They are also known as “Finance
Costs” or “borrowing costs.” A Company funds its operations using
two different sources:

 Equity Financing
 Debt Financing

None of the financing comes free for the Company. Equity

investors require capital gains and dividends for their investments,
and debt providers seek interest payments.
Finance costs, however, refers to the interest costs and other fees
given to debt financers. Interest expense can be on both short-term
financing and long-term borrowings.
In broader terms, borrowing costs include the following costs other
than the interest costs:

 Amortization of discounts and premiums based on the borrowings

of the Company
 Amortization of other costs incurred which are related to borrowings
 Foreign exchange differences and fees when the borrowings happen
in foreign currency
 Finance charges concerning the financial leases

Consider the Income Statement of Colgate Palmolive

Below we note that the financing cost of Colgate was $143 million and
$102 million in 2018 and 2017, respectively.