Loan maturity

Definition

How many years a loan runs before the final payment falls due.

Why It Matters

Maturity decides the payment, and the payment decides whether the earnings cover the debt, so it moves coverage more than the rate usually does. A 7(a) buying a business runs ten years or less, equipment included. Where real estate is part of the purchase, only the part buying the property may run longer, to a maximum of twenty-five, and the term blends by its share. The exception is an owner-occupied special purpose property, a car wash with its lot say, where real estate is 85% or more of the project and the whole loan may run twenty-five. That is why a trade that sells with its building can carry a price its earnings would refuse on a business-only structure, and why the term is a first-conversation question with a lender.

In numbers: A $4,000,000 car wash bought with its lot, the real estate 85% of the project, financed at 90% and 9% carries about $547,000 a year over ten years and about $363,000 over the twenty-five such a property may take, a 34% cut.