Amortization

Definition

The schedule repaying a loan's principal, more with each payment.

Why It Matters

Each level payment is mostly interest early and mostly principal late, and SBA acquisition loans usually run about ten years. A longer payback lowers the monthly bill and lifts the coverage ratio a lender tests, which is much of why an SBA ten-year term closes deals a five-year note cannot.

In numbers: A $900k loan at 10.5% over ten years costs about $12,100 a month; the same loan over five years costs about $19,300, which is often the whole difference between a deal that covers and one that does not.