The goal of every business is to maximize profit and reduce cost. Profitability is the optimal measure of every successful business. But how easy does profitability in business come?
This question accounts for the various literatures, seminars and business schools that try to teach business owners how to make their business profitable. At every point in time, every business or company needs a leverage to compete favourably and remain profitable.
This article would focus on the concept of leverage in business and why every successful business is a leveraged business.
Leverage is a term used in business and investment. In business, leverage entails the expansion of a business either in operations or sales or assets through various form of capital. When a company seeks capital from external sources it is said to have taken a leverage.
Such capital could be business loan from a financial institution, asset financing, trade credit from suppliers or equity from investors. The concept of leverage in business can be likened to “leverage&” in physics which refers to the use of a lever to gain mechanical advantage in lifting a heavy object. This would not have been possible with the help of the lever. In Business, the lever is capital which can either be borrowed or invested. Hence leverage is business is simply the use of capital to finance growth, expansion or acquisition of assets.
Broadly, the various form of business leverage can be categorised into two, Debt Financing or Equity. The former refers to loans or trade credits while the latter involve investment from investors.
Debt financing or business loan is the most popular form of leverage in business. Most successful businesses especially Small or Medium Size Businesses have increased profitability and achieve growth through loans.
Cash is commonly referred to as the lifeblood of every business. Businesses need capital leverage to stay competitive in the market. At a point in business, more money is required to make more money or increase revenue. This is why fund raising by start-ups all over the world is often celebrated. The point is the more capital base, a business has, the more it can achieve.
Are you a business owner seeking expansion, growth or to acquire more asset? Waste no time further in taking a leverage for your business
Coralstone Capital is a proprietary finance company. We offer various form of business leverage such as asset financing, business loans and financial advisory for small and medium sized businesses.
Coralstone Capital is your choice finance partner. Our business loans come with favourable terms, low interest, flexible repayment plans and zero hassles. And we offer free financial advisory to our clients.
