ADVANTAGES OF BALLOON LOAN FOR SELLER FINANCING?

I've been looking at balloon debt for seller financing, but I don't see a strong benefit IF one also uses an SBA loan so I wanted to quickly check with the community here in case anyone has done differently.

With an SBA loan for bank debt, you are restricted from paying the seller note until Year 3. From that point on, you could do a straight-line payment term over how many years you negotiated with the seller. However, if you don't have pre-payment penalties, then you have the flexibility to choose when you want to completely pay off the loan. You essentially have a balloon debt, just with the added flexibility of choosing when to pay.

Sure, you may be able to get lower monthly payments with balloon debt, but it seems the majority of deals have the balloon come due in Year 5, thus, you're really only realizing that benefit in Years 3 and 4.

What am I missing?



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