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 and nothing else runs ten years or less. Where the loan finances real estate or equipment with a useful life beyond ten, it reaches a maximum of twenty-five, and only the part buying the property earns the longer term. 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 purchase financed at 90% carries about $547,000 a year over ten years and about $363,000 over twenty-five, a 34% cut with nothing else changed.