The owners of Nimble manufacturing, Inc. (NM) have decided it is time to acquire a bigger manufacturing facility which will require a loan of $40 million dollars. NM is now ready to meet with George Jetson, the loan officer for Central Bank. The meeting is to discuss the mortgage options available to the company too finance the new facility.

NM has alos heard of an interest only loan and asks if this loan is available and what the terms would be. Central Bank sys that the bank offers an interest only loan with a term of 10 years and an APR of 3.5%. Central Bank goes on further to explain the terms. The company would be responsible for making interest payments each month on the amount borrowed. No principal payments are required. At the the end of the 10 year term, the company would repay the $40 million. However, the company can make principal payments at any time. The principal payments would work just like those on a traditional mortgage. Principal payments would reduce the principal of the loan and reduce the interest due on the next payment.