Key facts

Also called
Repayment schedule, payment schedule, amortization table, am schedule
Where you will see it
Term loans, SBA loans, equipment financing, commercial real estate, vehicle loans
Why it matters
It sets your payment, your total interest, and how much you still owe at any point

What is amortization?

Amortization is the math that turns a loan amount, a rate and a term into a fixed payment. Each payment first covers the interest owed on the remaining balance, and the rest reduces the balance. As the balance falls, the interest share of each payment falls too, so more of every payment goes to principal.

The amortization period and the loan term are not always the same: a commercial real estate loan might amortize over 25 years but mature in 10, leaving a balloon payment. Cash advances and many short term loans do not amortize at all; the payback is fixed on day one. Our guide to business loan rates shows how that changes the cost.

How is amortization calculated?

The payment is set so the loan reaches zero exactly at the end of the term. Here is a $100,000 loan at 8% over five years.

  • Monthly payment: about $2,028, the same every month.
  • Month one: interest is $100,000 times 8% divided by 12, which is $667. Principal is $2,028 minus $667, which is $1,361.
  • Month two: the balance is now $98,639, so interest is $658 and principal is $1,370.
  • Month 60: interest is about $13 and principal is about $2,015.
  • Total paid: about $121,660, so about $21,660 is interest.

Paying an extra $500 a month cuts the term to about 46 months and the total interest to about $16,500. Our business loan calculator builds the full table for your own numbers.

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What do lenders consider normal?

Typical amortization periods follow the life of what the loan buys. Working capital term loans typically amortize over one to five years. Equipment loans typically match the useful life, three to seven years. SBA 7(a) loans go up to 10 years for working capital and equipment and up to 25 years for real estate. Commercial real estate loans typically amortize over 20 to 25 years with a shorter maturity.

Monthly payments are standard on bank and SBA loans. Weekly and daily payments are common on online loans and are still amortized, just in smaller steps, which makes the APR slightly higher than the same loan paid monthly.

What should you watch for?

Watch for a balloon. If the amortization is longer than the term, you will owe a lump sum at maturity, so know the amount before you sign. Watch for loans that are not really amortized: if you owe the full interest even when you pay early, extra payments save you nothing.

Watch for prepayment penalties on longer amortizations, especially commercial real estate. And watch interest only periods, which lower the payment for the first year or two but leave the balance untouched, so the amortized payments afterward are higher. Ask the lender for the full table, not just the payment.

Related terms

Amortization is how a rate, whether fixed or prime plus a spread, becomes a payment, and that annual payment is the denominator in DSCR. Fees on top of the schedule are what push the APR above the rate. You will see amortization tables most on term loans and commercial real estate loans. You can apply here, or ask your AI assistant to compare payment schedules across offers and apply for you through our MCP server.

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