2 min read
What it means
Leverage (or gearing) means funding growth with debt so a small amount of your own capital controls a larger investment. If the investment earns more than the cost of the debt, your return on your own money is amplified. If it earns less, the loss is amplified too — the interest is due regardless of how the investment performs.
How to use it responsibly
Leverage rewards businesses with reliable cash flow and a return that clearly beats the borrowing cost — check with the return-on-borrowing calculator. The discipline is not to over-gear: keep gearing at a level a bad month can survive, and watch the warning signs. Used well it accelerates growth; used carelessly it accelerates trouble.
What it means for you
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.
Frequently asked questions
Is leverage good or bad?
Neither on its own. Sensible leverage against a return that beats its cost accelerates growth. Excessive leverage, or borrowing for uncertain returns, magnifies losses. The tool is fine; the discipline in how much you use is what matters.
How much leverage is safe?
Enough that a downturn or a delayed return won't sink you. Keep gearing at a level your cash flow can service through a bad patch, and stress-test repayments against a slow month before taking on more.
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Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.