Why Small Businesses Need Fully Amortizing Loans

Small companies are sensitive to demands on cash flow, particularly during the early, start-up years when business can be unpredictable. BCI Lending extends loan terms that can assist in the financial stability of your business by lowering debt repayment requirements (debt service) through fully amortizing loans. Simply put, debt service is the total principal and interest payment due monthly on a loan. A fully amortized loan reduces your company’s monthly repayment of debt—like financing your home or car—through consistent, truly long terms.

There is a significant difference between a fully amortizing loan and the type of “long-term” business loans banks make. When a bank presents their version of a “long term” business loan, it will compute monthly payments based on an extended amortization schedule. What most entrepreneurs may not focus on is that although their payments are based on an amortized schedule of 10 or 20 years, traditional banks simultaneously require that the loan mature and be payable in full at a date much earlier than the extended loan amortization implies. Monthly payments may be calculated on 20 years, but after only a few years banks can ask for a balloon payment (full repayment of debt). Traditional banks seldom make truly long term loans with consistent monthly payments for small businesses.

The ongoing success of a small business may be hurt by the loan maturing in three or five years.  Right when things get rolling this huge debt comes due and suddenly business is disrupted and unanticipated stress arrives. Traditional bank loans for small business generally do not carry the extended repayment terms found in fully amortizing loans. Even if a bank is willing to renew a loan, there is no assurance of new loan terms. There will be additional origination fees, attorney’s fees for the renewal and the cost associated with the time and effort spent renegotiating and closing the new loan.

BCI Lending’s small business loans are long term and fully amortizing. Your business repays its loan on a contractual schedule for the life of the loan with no early due dates for the balance. Monthly payments for the full term of the loan mean no surprises, less cash flow strains and no disruptions in business. In other words, if BCI Lending makes your business a loan for 20 years, then just like a home mortgage, you simply make monthly payments and the loan remains in place for the full 20 years.

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