What is the repayment structure of bank debt?

The repayment structure of bank debt is typically amortized over a period of time, which means that the principal amount of the loan is paid down gradually through scheduled payments that include both interest and principal. This structure allows borrowers to manage their cash flow more effectively as they make regular payments that reduce the outstanding balance over the life of the loan.

Amortization can be beneficial for borrowers because it provides a clear repayment schedule, which helps in financial planning and budgeting. Each payment decreases the principal amount owed, thereby reducing the interest expense over time, as interest is calculated on the remaining balance. This structure is common in various types of loans, including mortgages and certain types of commercial loans.

In contrast, other options like paying in full at the end of the term or making only interest payments would not typically provide the same level of regular cash flow management. Random payments based on cash flow may introduce uncertainty and complexity, making it less straightforward for borrowers to adhere to a reliable repayment plan. The amortized structure is largely favored for its predictability and alignment with borrower cash flow management.