Amortization Schedule

Like everyone else, a business owner needs to borrow money to fund various projects. Also like everyone else, a business can benefit from taking a good hard look at a commercial loan amortization schedule to guide the decision-making process.

Commercial loan amortization schedules work a little differently than a personal loan schedule might. Lenders typically structure them over a shorter period of time with higher payments than a homeowner might realize. Still, even though the term is shorter, the banks are still making money. The money is in the compounding and you can see this clearly in any loan amortization table.

The benefits of looking at a commercial schedule are the same for a business as they would be for a private homebuyer. For example, a car loan amortization schedule would show many payments you have to make before you begin to pay off the principal amount. Loan amortization schedules also include:

• The basics of how you will service the loan. Just like a regular amortization schedule, a commercial one shows how you pay principal and interest on the loan. This can give you a good illustration of how the loan process will work and how the lender will assign money for payments. These schedules show monthly breakdowns of how much money goes on the interest serving, how much goes on principal and what the real balance of the loan is. This snapshot of expected monthly expected activity gives real insight into the loan process and what a business can expect to pay out.
• The total costs of the loan. This is an important benefit of looking at a commercial amortization schedule or any amortization schedule for that matter. You get a true picture of the total costs of the loan if you follow the laid out plan for repayment. You should expect the total costs will be a whole lot different from the principal amount. Indeed, much higher when you add in the compounded interest charges. Since interest compounds over the life of the loan, the true repayment will often be much, much higher than the expected the original loan value.
• How to plan better. If you apply for a simple interest loan, the schedule itself can show you how higher principal payments or extra payments can assist in saving money on your loan. It can also help with guiding decisions about down payment amount. When every penny toward the loan repayment counts, extra payments, over payments and larger down payments can all add to lessen the overall, long-term costs of a commercial loan.

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