2016-12-11 00:00:00 Finance and Accounting English Explore ways that leverage can work for you. Leverage is the practice of using loans instead of cash to acquire assets. https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/03/Two-Small-Business-Owners-Discuss-How-They-Can-Leverage-Debt.jpg https://quickbooks.intuit.com/ca/resources/finance-accounting/leveraging-make-debt-work-for-you/ Leveraging: Make Debt Work for You

Leveraging: Make Debt Work for You

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.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

Using Accounting Ratios to Understand Your Business

As you build a small business, it’s important to measure your company’s…

Read more

What is the Debt Ratio?

Your debt ratio shows how your company’s debts compare to its total…

Read more

What Are Bad Debt Expenses?

Bad debt expenses are debts you can’t collect from customer invoices. This…

Read more