Balloon Loan

Definition:

A loan that requires a single, usually final, payment that is much greater than the payment preceding it

Though balloon loans are usually written under–and called by–another name, you can identify them by the fact that the full amount of the loan is turned over when the contract is signed, but only the interest is paid off during the life of the loan, with a”balloon” payment of the principal due on the final day. Occasionally, a lender will offer a loan in which both interest and principal are paid with a single “balloon” payment. Balloon loans are usually reserved for situations when a business has to wait until a specific date before receiving payment from a client for its product or services. In all other ways, balloon loans are the same as installment loans.

Related Content

Product Development

The overall process of strategy, organization, concept generation, product and marketing plan creation and evaluation, and commercialization of a new product

Exit Interview

The formal conversation that takes place between an employee and an HR or other manager to determine the reason(s) the employee is leaving

Primary Market Research

Iinformation that comes directly from the source--that is, potential customers. You can compile this information yourself or hire someone else to gather it for you via surveys, focus groups and other methods.

Credit Policy

Guidelines that spell out how to decide which customers are sold on open account, the exact payment terms, the limits set on outstanding balances and how to deal with delinquent accounts

Mergers

The combination of one or more corporations, LLCs, or other business entities into a single business entity; the joining of two or more companies to achieve greater efficiencies of scale and productivity

Subchapter S Corporation

A special form of corporation that allows the protection of limited liability but direct flow-through of profits and losses