Bensalem, PA · Member since 2012 · 9 posts · 0 votes
Hi, if you are creating a business plan, and are looking for funding where you take a loan that has interest-only payments with a balloon payment a year or two down the road, how do you account for the balloon payment in your business plan? Is it considered an operating expense, a one-time expense or something else? I ask this because when the balloon gets paid, it will hit the business cash flow, so how is this amount accounted for?
In your business plan you will budget for refinancing the property (if you plan on keeping it). Interest rates are rising so make sure to factor that in as well.
The balloon payment is simply a liability. But as mentioned, I would start looking to refinance tomorrow as it’s going to cost you to wait. Don’t forget the possible joy of no financing being available when your balloon comes due and handing the proxy back to the seller.