# Balloon payment

Principal due at the end of a loan its payments did not repay.

An [SBA 7(a)](https://searchspheresource.com/glossary/sba-7a) loan avoids one by amortizing fully, so a balloon on a bank or [seller note](https://searchspheresource.com/glossary/seller-note) is a date you must be ready to refinance or pay off. That date is a real risk to underwrite, because refinancing depends on the business performing and on credit conditions years from now, neither of which you control. Model whether the company could carry a replacement loan at a higher rate, and treat a near-term balloon as a reason to negotiate the term rather than a detail buried in the note.

In numbers: A $900k note at 10.5%, amortized over ten years but due in five, still owes about $565k at maturity, because early payments are mostly interest; that $565k is the balloon, and the plan for it is part of the deal.

Source: https://searchspheresource.com/glossary/balloon-payment
Not dated: A definition is editorial: what a term means, why it matters, and an example. None of it reads a source that can go stale, so there is no date to take and a stamped one would be the build time wearing a costume.

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