A balloon payment is a larger final payment at the end of a finance agreement. Part of the asset’s cost is deferred to that single lump sum, which reduces the monthly payments during the term. It is common on vehicle and some plant agreements, where the payment is set against the asset’s expected value at the end.
Lower monthlies can help cash flow, but the money is deferred, not saved. You will still need to fund the balloon when it falls due, either from cash, by selling or part-exchanging the asset, or by refinancing it if a lender is willing.
The main risk is that the asset is worth less than the balloon when the term ends. If that happens, selling it will not clear the balance and you have to make up the shortfall. Heavy use, high mileage, poor condition or a weak second-hand market all make this more likely. Interest is also charged on the deferred amount over the term, so the total cost is typically higher than an equivalent agreement without a balloon.
Whether a balloon is available, and how it is set, depends on the lender’s view of the asset and your business. Ask for the full figure and the end-of-term options in writing before signing.