Balloon Payment
A large final payment due at the end of a loan term, significantly bigger than the regular payments before it, often used to keep earlier payments lower.
A balloon structure typically calculates regular payments as if the loan amortized over a longer period than it actually runs, then requires the remaining balance in one lump sum at maturity, which keeps monthly payments lower during the term but requires a plan to pay off or refinance the balloon amount.
Businesses using balloon-structured financing, common in some commercial real estate and equipment deals, need to plan ahead for that final payment, whether through refinancing, a sale, or accumulated cash reserves.
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