What to do when your balloon payment is due

First, check what you actually have

Balloon and residual are used loosely and often interchangeably. What matters is whether your contract ends with a single large amount to settle, and what that amount is.

It will be on your contract. If you cannot find it or cannot tell what applies, send us the paperwork and someone from our team will read it and tell you plainly.

You can usually refinance it

Rather than paying the amount out in one go, it can often be refinanced across a new term. You keep the equipment and go back to a regular payment.

This is the most common outcome and it is worth knowing early, because businesses who assume they have to find the cash sometimes make worse decisions in the months beforehand than they needed to.

Start twelve months out

Twelve months before it falls due is a sensible point to have the first conversation. Look again at six months, and again at three.

The reason is not paperwork. It is that leaving it to the final few weeks narrows what can be arranged, and narrows it at precisely the moment you have the least ability to walk away. Early gives you room. Late gives you whatever is left.

What the equipment's age does to your options

This is the part that catches people out. When you refinance a balloon you are financing a machine that is now several years older than when you first bought it, and age limits apply to the new term rather than the old one.

Limits differ by asset. Printing equipment is a useful illustration: typically the equipment cannot already be seven years old when a new term starts, and cannot be older than twelve by the time that term ends. A machine comfortably inside those limits today can fall outside them by the time a late conversation happens.

Tell us what the equipment is and roughly when it was bought, and we can tell you quickly whether it is in range.

The other options

You can pay the amount out and own the equipment free of finance, which suits businesses holding cash they have no better use for.

You can also sell the equipment and settle from the proceeds, which is worth considering if you were going to replace it soon anyway. That decision is easier made twelve months out than three weeks out.

If what you want is capital out of equipment you already own, that is a different structure. See the other ways to refinance equipment you own for how those work.

If your contract is Rent to Own, there is no balloon

Worth saying because it is a common source of confusion. Rent to Own ends with one or two ordinary monthly payments, depending on the arrangement, and then you own the equipment, so there is nothing large to plan for. See how Rent to Own works if you are choosing how to finance the next machine and would rather not do this again.

Which lender do I go to

You do not. Someone from our team looks at the contract and the equipment, compares lenders and arranges it. Figures are ex GST, and nothing is settled until a funder has assessed it.