What is Leveraged Finance?

Category: Finance

1Definition

Financing that uses significant amounts of debt to fund acquisitions, buyouts, or corporate expansion.

2Context

Powers private equity deals and corporate restructuring. Higher risk but potentially higher returns.

3Example

A private equity firm uses leveraged finance to buy a company, putting up 30% equity and borrowing 70%.

⚠Common Trap

Leverage isn't inherently bad—it amplifies both gains and losses. The risk depends on how it's structured.

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