A balloon payment structure can be a convenient alternative to a bank loan if you need to start using the equipment as soon as possible or if you are looking for fixed interest and lower rates on your purchase.
A balloon payment is a lump sum payment attached to a lease. It is a payment that you would usually make at the end of the term.
Balloon leases are a hybrid of a traditional lease and a loan. While you make payments based on the depreciating value of an asset during the term, you have the option to buy it at market value or a pre-determined amount when your term expires.
It is a way to start using the equipment you need without a significant effect on cash flow. Instead of immediate down payment, your leasing agreement covers the entire cost of the asset.
Ballon leases are popular among seasonal businesses that may not have the right amount ready when the high season begins. Companies that find a rare deal on equipment may need to act fast and use a ballon lease structure to get what they want. With this financial product, you do not have to come up with a large sum of money upfront or wait weeks for approval.
Others use balloon leasing to try out new equipment that is not otherwise available. Unlike a purchase, they may return the equipment at the end of the lease term. On the other hand, if they choose to keep it, there is an established purchase price to plan for.
Being a privately-owned direct lender, AFG can offer creative deal structures for any business situation. Talk to our experienced Account Manager today!