Amortization is the process of repaying a loan through regular scheduled payments that cover both interest and principal until the balance reaches zero. On an SBA 7(a) acquisition loan (usually a 10-year term), amortization determines your fixed monthly payment, the number that drives your DSCR. (In accounting, amortization also means spreading an intangible asset's cost over its useful life.)
How payments shift over time
| Stage | Mostly interest or principal? |
|---|---|
| Early years | Mostly interest |
| Later years | Mostly principal |
The total payment stays level (~$146,000/yr), but its makeup shifts. Longer amortization (e.g. 25 years with real estate) lowers the payment and lifts DSCR.
Why it matters when buying a business
The amortization term is a direct DSCR lever: stretching a loan over more years shrinks the annual payment and can turn a declined deal into an approved one. Because most SBA acquisition loans amortize over 10 years, the payment is heavy, model it precisely with the loan calculator before you offer.
