Business loan amortisation schedule: how to read one and see where your money goes

A business loan amortisation schedule is the most useful page a lender can give you that most owners never ask for. It’s a table showing every repayment split into two parts, the interest and the principal, and the balance left after each one. Read it properly and you can see exactly what the loan costs, what you’d owe on any date and why the first couple of years feel like you’re getting nowhere.

The good news: once you know what the columns mean, it takes about five minutes to read one.

What is an amortisation schedule on a business loan?

“Amortisation” just means paying a debt down to zero through regular repayments. On a principal and interest (P&I) loan, each repayment does two jobs:

1. It pays the interest charged since the last repayment, worked out on the balance still owing.
2. It reduces the principal, the amount you actually borrowed, with whatever is left over.

The schedule lists those two jobs for every repayment, start to finish. A typical one has five or six columns:

Column	What it tells you
Repayment number or date	Which repayment you’re looking at
Repayment amount	What leaves your account (usually the same each time)
Interest	The part of that repayment that is the lender’s charge
Principal	The part that actually reduces the debt
Closing balance	What you still owe after that repayment
Cumulative interest (sometimes)	Total interest paid so far

If you’re new to the jargon, our business finance glossary decodes the other terms you’ll meet in a letter of offer.

How do you read one, row by row? (illustrative)

Here’s a made-up example to show the shape of it. It isn’t a real client, and the figures are rounded.

Priya runs an electrical contracting business in Adelaide. She borrows $200k over five years, repaid monthly on a principal and interest basis, to buy two vans and a stack of test gear. Her monthly repayment works out at about $4,250. Here’s an extract from her schedule:

Repayment	Interest	Principal	Balance after
1	$1,667	$2,583	$197,417
2	$1,645	$2,604	$194,813
12	$1,420	$2,830	$167,546
24	$1,124	$3,126	$131,694
30	$964	$3,285	$112,384
48	$435	$3,815	$48,335
60	$35	$4,214	$0

Three things jump out:

• The repayment never changes, but its make-up does. In month one, about 39 cents in every repayment dollar is interest. By the final month it’s under one cent.
• The balance falls slowly, then fast. It takes 30 repayments to clear the first $87,600 or so, and the last 30 clear the remaining $112,400.
• Total interest over the loan is about $55,000. That’s the number to compare between offers, alongside the fees, because the regular repayment alone doesn’t tell you the whole cost.

Why does it work this way? Interest is calculated on what you owe. At the start you owe the most, so interest takes the biggest bite. Every principal payment shrinks the balance, which shrinks next month’s interest, which leaves more room for principal. It’s a snowball, just a slow one to get rolling.

Why does paying out halfway save less than you’d expect?

This is the bit of the schedule that catches people out. Look at Priya’s loan again at repayment 30, the halfway point:

At the halfway mark	Amount
Total repaid so far	About $127,500
Of that, interest	About $39,900
Of that, principal	About $87,600
Still owing	About $112,400
Share of the loan’s total interest already paid	Roughly 73 per cent

So if Priya wins a big contract and pays the loan out at month 30, she saves the remaining interest. On a standard reducing-balance loan, that’s roughly $15,000. That’s worth having, but it’s far less than half the interest, because most of it has already been paid.

Two practical lessons:

• Early extra repayments do the most work. A lump sum in year one wipes out interest that would have been charged for years. The same lump sum in year four saves much less.
• Check how your loan charges interest before you count on savings. Some short-term business loans charge a fixed total cost, set at the start, instead of interest on a reducing balance. Paying those out early may save little or nothing unless the contract offers an early-payout discount. Some fixed-price loans also carry break costs. The schedule, plus the payout clause in your contract, tells you which you’ve got.

Thinking about borrowing for gear like Priya’s? You can check your options here. It’s a short form, and a person, not an algorithm, reads it.

Amortisation period vs loan term: what’s the difference?

Most owners assume these are the same thing. Often they are. But on larger and property-secured business loans they can be different, and that changes everything at the end.

• The amortisation period is how long the repayments are calculated to take to clear the debt.
• The loan term is when the contract ends and whatever is owing falls due.

Here’s an illustrative example. Say a business borrows $600k against a commercial property. The lender sets a five-year term but calculates repayments as if the loan ran for 15 years:

	Repaid over 5 years	Amortised over 15 years, 5-year term
Monthly repayment	About $12,750	About $6,450
Owing when the term ends	$0	About $488,000

The lower repayment is real cash-flow relief. But about $488k is still owing on the term’s end date, and it has to be refinanced, extended or repaid. That’s a balloon in all but name. It can be a perfectly sound structure, as long as you know it’s there and you’re planning the refinance a year or so ahead, not in the final month.

Our guide to interest-only, balloon and P&I repayments covers how these structures compare. If your loan starts interest-only, its schedule will show flat interest rows and no reduction in the balance until the switch, which our guide on what happens when the interest-only period ends walks through.

How much of my repayment is interest, and why does it matter at tax time?

The interest column is the one your accountant cares about. Interest on money borrowed for business purposes is generally a deductible expense. Principal repayments generally aren’t, because repaying a loan isn’t a cost of earning income. So:

• The deductible amount shrinks every year, even though your repayment stays the same. In Priya’s example, interest falls from about $18,500 in year one to about $2,700 in year five, while her repayments total about $51,000 every year.
• Your cash outgoings and your tax deductions drift apart. Late in a loan, you’re paying almost the same cash but claiming far less. Budget for that.
• Not all interest is equal. Since 1 July 2025, the ATO’s general interest charge and shortfall interest charge are no longer deductible. The ATO’s page on denying deductions for ATO interest charges explains that this applies to charges incurred on or after that date. If you’re weighing an ATO payment plan against a business loan to clear a tax debt, ask your accountant to compare the after-tax cost of both.

Hand your accountant the schedule each year. It gives them the exact interest figure for the financial year without anyone digging through statements.

How can you get a schedule, and what should you check on it?

Ask the lender before you sign. Most can produce one, or at least give you the repayment, the total repayable and the balance at key dates. business.gov.au’s guide to applying for a business loan suggests working out “the maximum repayment you can afford” and comparing upfront and ongoing charges. The schedule is how you do both properly.

Or build a rough one yourself. Moneysmart’s loan calculator is designed for personal loans, but it shows the mechanics clearly. Note its limits: it leaves out fees, doesn’t handle interest-only loans and only goes up to 15 years. A spreadsheet with a payment formula does the same job for any term.

Once you have one, check these five things:

1. Does the starting balance include capitalised fees? If establishment fees are added to the loan, you’re paying interest on them too.
2. Does the final row reach zero? If not, there’s a residual or balloon. Find out how big it is and when it’s due.
3. Does the repayment frequency match your cash flow? Weekly or monthly changes the schedule slightly and your cash flow a lot.
4. What’s the balance at your likely exit date? If you plan to sell, refinance or upgrade the asset in year three, that row is your payout ballpark (before any fees).
5. Does the term match the job? If the balance is still high when the asset is worn out, the loan runs longer than the thing it paid for. Our guide on matching the loan to the job explains why that matters.

What changes the schedule after you’ve signed?

A schedule is a forecast, not a promise. These events redraw it:

• A variable pricing change. The lender usually recalculates the repayment, or keeps it the same and changes how long the loan runs.
• Extra repayments or a redraw. Extras pull the finish line closer. Redraws push it back.
• A missed or deferred repayment. Unpaid interest may be added to the balance, which means paying interest on interest.
• A restructure or refinance. This creates a brand-new schedule. Compare the total interest on the new one with what’s left on the old one, plus any exit and set-up costs.

If you’re not sure which loan shape suits the job in the first place, our explainer on which business loan is right for you is a good starting point.

Got a plan to fund? Let’s look at the numbers together

An amortisation schedule turns a loan from a vague monthly figure into something you can plan around: what it costs, what you’ll owe and when, and what your accountant can claim. Owners who read theirs before signing tend to choose better terms, time their extra repayments well and never get surprised by a lump sum at the end.

If you’ve got an awesome plan and want to see what the repayments could look like, we’d love to help. The enquiry takes about a minute, and there’s no credit check when you first enquire, so asking won’t leave a mark on your credit file. We won’t send your details to a pile of lenders either, so there’s no flood of calls from people you’ve never heard of. A real lending specialist reads what you send, looks at what you want to fund and how your business earns, and calls you to talk through loan shapes and repayment structures. Please fill the form in accurately, especially the amount, what it’s for and your turnover, so we can match the right option first time.

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