Title: Advantages of Financial Leverage | Your Business
Headings: Advantages of Financial Leverage
Advantages of Financial Leverage
Increases Available Money
Shareholder Profits
Better Credit
Considerations

Content: If the profit increases 2 percent, shareholders get 2 percent more. When a business takes on a loan, the improved profitability of the business does not impact the loan payment. The difference in profitability yields higher value per share or increased dividends. If the profit increases 2 percent, shareholders of a business with financial leverage may see, for example, an increase in dividend payments of 3 percent. Better Credit
The high rate of business failure often leads lenders to be somewhat risk-averse, even for businesses that seem financially stable. Securing even small amounts of financial leverage and paying consistently on the borrowed funds can help to improve the overall credit rating of the business. The next time the business seeks credit, it can often secure better options in terms of repayment length and overall interest rate. Because a business can need financial leverage a number of times over the lifetime of the business, improving this credit rating represents a long-term investment in itself. Considerations
Financial leverage does not guarantee an improvement in profitability. All businesses must cope with a degree of uncertainty regarding future sales, but businesses offering new or untested products and services run much higher risks of failure.