FINANCE GLOSSARY
Leverage
Financial Leverage
The use of borrowed capital to finance assets or operations.
What does Leverage mean?
The use of borrowed capital to finance assets or operations. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Leverage in context
An investor contributes $1 million and borrows $3 million to acquire a $4 million property.
Why it matters in financing
Leverage can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related finance terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.