Leveraging: Make Debt Work for You

by Greg DePersio

0 min read

Financial leverage is the practice of [using loans],(http://www.accountingcoach.com/blog/what-is-financial-leverage) rather than cash, to acquire assets. Small business owners might use leverage to acquire high-priced assets such as real estate and equipment. For a new small business owner, the biggest benefit of leverage is that it enables you to make large purchases that you might not otherwise be able to afford. For example, say want to buy a downtown warehouse that costs $1 million but you only have $250,000 in cash savings. With a strong credit rating, you can use a portion of your cash for the down payment and borrow the balance. Should the warehouse increase in value and you sell it, you gain profit from the sale, even after you pay off the loan.

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