TL;DR: The maturity date is the date on which a loan's term ends and any remaining principal becomes due. It defines the lifespan of a facility. In an interest-only loan with a bullet structure, the full principal is repaid at the maturity date.
The maturity date is the end date of a loan's life, the point at which the borrower must have repaid the principal in full. What is due at maturity depends on the structure. In an amortising loan, the balance has been paid down over the term, so little or nothing remains. In an interest-only loan with a bullet repayment, the entire principal comes due at maturity in a single payment.
The maturity date is a date to plan toward from the outset, particularly with a bullet structure where a large payment lands at the end. Borrowers commonly meet the maturity repayment through refinancing, a new equity round, an exit, or accumulated cash flow. Treating the maturity date as a distant problem is a mistake; treating it as a planned milestone is sound practice.
Flow Capital's facilities run on a 2 to 3 year term, interest-only, with the full principal repaid at the maturity date.
What happens at the maturity date? Any outstanding principal is repaid. In a bullet structure, that is the full principal in one payment.
Can a maturity date be extended? Sometimes. Borrowers and lenders may agree to extend or refinance before maturity, particularly where the company is performing and simply needs more time.
Related terms: Bullet Loan · Interest-Only Period · Amortisation · Default
