A balloon payment is a large lump sum due at the end of a commercial loan term, after years of smaller payments that didn't fully pay down the balance. It's a common structure in commercial lending, and it works fine as long as you plan for it well ahead of time. The problems start when owners treat the due date as a future problem instead of an active deadline.
The timing question that matters most: when should you start looking at refinance options?
The honest answer is earlier than feels necessary — generally six to twelve months out, not six to twelve weeks. That window gives you room to:
- Shop multiple lenders instead of taking the first offer under time pressure
- Address any issues with the property's financials or occupancy that might affect underwriting
- Explore whether market conditions favor a rate lock now versus waiting
- Line up a backup option in case your first choice falls through
Waiting until the balloon payment is imminent narrows your options and your leverage. Lenders can tell when a borrower is refinancing out of urgency rather than strategy, and it shows up in the terms they offer.
If you have a balloon payment on the horizon, the right time to start the conversation is now, not when the date gets uncomfortably close.