A balloon payment clause refers to a provision in a loan agreement that requires the borrower to make one large payment at the end of the loan term, typically after a series of smaller periodic payments. This final payment is significantly larger than the earlier installments and is used to pay off the remaining balance of the loan.
G. Maker had advised Holder that it would need additional time to pay off the Promissory Note balance and make the final balloon payment. Maker and Holder had agreed (i) to extend the term of the Promissory Note by one (1) year and continue the quarterly principal payments through September 30, 2021 with the final balloon payment due on December 31, 2021 and (ii) that the quarterly principal payment that would otherwise be due on December 31, 2020 would not be required to be made until the final balloon payment due date.
WHEREAS, Armistice previously deposited $15,000,000 (the “Escrow Funds”) in an escrow account (the “Escrow Account”) governed by that certain Escrow Agreement dated as of November 1, 2019 (the “Escrow Agreement"), by and among Armistice, the Deerfield Parties and JPMorgan Chase Bank, N.A (the “Escrow Agent”), for the purpose of securing a portion of Armistice’s obligations under the Armistice Guarantee, to guarantee the balloon payment of $15,000,000 due to the Deerfield Parties by Aytu on the last business day of January 2021 or earlier in accordance with Section 1.6(g) of the Deerfield Agreement (the “Balloon Payment Obligation”); and
WHEREAS, Aytu desires to transfer the sum of $15,000,000 to the Deerfield Parties in early satisfaction of the Balloon Payment Obligation.
2. In full satisfaction of the Balloon Payment Obligation, Aytu has paid to the Deerfield Parties, by wire transfers in immediately available funds, an aggregate amount equal to $15,000,000, pursuant to the wire instructions set forth below: $14,720,600.96 Deerfield CSF, LLC Name of Bank: ABA Number: Beneficiary: Account Number: $256,220.38 James Flynn Bank: ABA Number: Beneficiary: Account Number: $23,178.66 Peter W. Steelman TTEE and Sara H. Steelman TTEE Bank of America ABA Account Reference:
3. The Deerfield Parties, jointly and severally, hereby acknowledge receipt and payment in full of the Balloon Payment Obligation. All parties to this Agreement acknowledge and agree that the remaining fixed payments set forth on Schedule I of the Waiver other than the Balloon Payment Obligation remain due and payable pursuant to the terms of the Waiver, and that nothing in his Agreement alters, amends, or waives any provisions or obligations in the Waiver or the Deerfield Agreement other than as expressly set forth herein.
On March 2, 2018, Frost, a director, loaned the Company $40,000 in the form of a promissory note. The note bears interest of 20% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of March 31, 2020, this note is in default and the accrued interest was $16,696, and the principal balance was $40,000.
On January 24, 2019, Kanuth, an officer and director, loaned the Company $11,000 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. On July 15, 2019, the principal of $11,000 and accrued interest of $319 was converted into common stock of the Company. On April 7, 2020, the accrued interest balance was converted into common stock of the Company .
On April 15, 2020, Kanuth, an officer and director, loaned the Company $4,200 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of September 30, 2020, the principal balance was $4,200 and the accrued interest was $71.
With respect to Characteristic 179, we recomputed the Fully Funded Amortized Mortgage Loan Underwritten Stabilized NCF Debt Yield by dividing the Underwritten Stabilized NCF (if Underwritten Stabilized NCF is not available, we were instructed to use the Underwritten NCF) by the Mortgage Loan Fully Amortized Balloon Payment. With respect to the Mortgage Asset identified on the Data File as “Tacoma Distribution Center,” we were instructed by representatives of the Company to reduce the Mortgage Loan Fully Amortized Balloon Payment by $1,000,000 when performing this calculation.
On February 4, 2019, Kanuth, an officer and director, loaned the Company $13,197 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. On July 15, 2019, the principal of $13,197 was converted into common stock of the Company. On April 7, 2020, the accrued interest balance was converted into common stock of the Company (see Note 6).
The final payment due on December 31, 2021 shall be a balloon payment representing the remaining principal balance plus all accrued and unpaid interest.”
As of March 31, 2022, the outstanding balance of each tranche of $35,443.2, is repayable in 14 equal quarterly installments of $1,005.7 from April 2022 to July 2025 and a balloon payment of $21,363.6 each payable together with the last installment.
WHEREAS, Armistice has agreed to deposit $15,000,000 (the “Escrow Funds”) in an escrow account (the “Escrow Account”) governed by that certain escrow agreement dated on or about the date hereof by and among Armistice, the Deerfield Parties and JPMorgan Chase Bank, N.A. (the “Escrow Agent”), in substantially the form attached hereto as Exhibit B (the “Escrow Agreement”) for the purpose of securing the portion of the Primary Obligations under the Armistice Guarantee comprised of the balloon payment of $15,000,000 due to the Deerfield Parties by Buyer on the last business day of January 2021 or earlier in accordance with Section 1.6(g) of the Deerfield Agreement (the “Balloon Payment Obligation”);
(b) In the event that the Deerfield Parties do receive payment of the Balloon Payment Obligation in full when due and the Escrow Funds are still in the Escrow Account, then, upon written request from Armistice, Armistice and the Deerfield Parties shall sign and deliver to the Escrow Agent a joint written instruction sufficient under the Escrow Agreement to cause the Escrow Agent to deliver the Escrow Funds to Armistice.
“New Balloon Payment” means: (a) in relation to Advance A, the amount of one million four hundred and seventy five thousand Dollars ($1,475,000);
“Original Balloon Payment” means: (a) in relation to Advance A, the amount of one million one hundred and seventy five thousand Dollars ($1,175,000); (b) in relation to Advance B, the amount of two million fifty thousand Dollars ($2,050,000); (c) in relation to Advance C, the amount of six hundred and seventy five thousand Dollars ($675,000);
A balloon payment is a large payment that is due at the end of a loan or financing agreement. It is significantly larger than the regular installment payments that are made throughout the term of the loan. Balloon payments are common in loans that have split repayments, where smaller amounts are paid initially, and the bulk of the loan is repaid at the end in one large lump sum.
Balloon payments can be found in various types of loans, such as mortgages, car loans, and business loans.
A balloon payment structure might be used in situations where:
To effectively incorporate a balloon payment into a contract or loan agreement, you should:
Clearly Define Terms: Outline the term of the loan, regular payment amounts, interest rate, and specifically highlight the amount and due date of the balloon payment.
Provide Timelines: Include a schedule of payments leading up to the balloon payment, ensuring transparency in how the payments are structured.
Include Refinancing Options: Allow for potential refinancing before the balloon payment, if applicable, as this can be essential for borrowers.
Detail Consequences for Non-Payment: Specify what will happen if the balloon payment is not made on time, such as penalties, additional interest, or potential repossession of the collateral.
Loan Term: 5 years
Monthly Payment: $300
Interest Rate: 4% annually
Balloon Payment Due: $10,000 at the end of the fifth year
Balloon payments are often included in:
Real Estate Contracts: Mortgages with balloon payments, often in the form of a balloon mortgage where the final large payment may be refinanced or paid off with the sale of the property.
Automobile Loans: Car loans that ease short-term cash flow demands with smaller initial payments, but require a large balloon payment at the end.
Business Loans: Commercial loans that offer reduced payments during the early stages of a business but necessitate a big payment once the business is more established and potentially more profitable.
Construction Loans: Loans that finance a project where the large, final payment might coincide with the project’s completion or receiving additional capital.
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