What is a balloon payment on a business loan?

A balloon payment is a large lump sum due at the end of a loan term, after smaller regular payments. For example, a 5-year loan with a balloon structure might have low monthly payments for 5 years, then a final payment of 50-80% of the principal. Balloon loans offer lower monthly cash flow burden but require refinancing or a large cash reserve at maturity — risky if rates rise or sales decline.