Balloon Loan

By Entrepreneur Staff

Pencil

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.

More from Expansion Financing

Factoring

A financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital

See full definition

Angel Investor

An individual who invests his or her own money in an entrepreneurial company

See full definition

Friends/Family Financing

Monies, usually in the form a loan, that a business owner gets from either family members or friends in order to help finance their startup or growing business

See full definition

Government Grants

An award of financial assistance in the form of money by the federal government to an eligible grantee with no expectation that the funds will be paid back. The term does not include technical assistance which provides services instead of money, or other assistance in the form of revenue sharing, loans, loan guarantees, interest subsidies, insurance, or direct appropriations

See full definition

Latest Articles

Business News

JPMorgan Shuts Down Internal Message Board Comments After Employees React to Return-to-Office Mandate

Employees were given the option to leave comments about the RTO mandate with their first and last names on display — and they did not hold back.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Business News

Zillow Predicts These 10 Places Will Have the Hottest Housing Markets in 2025

Zillow predicted that the hottest housing market of 2025 will be Buffalo, New York. Here's why.