Bullet
Private Equity glossary · Advanced LBO Modeling Mechanics & Deal Structuring
Definition
Debt amortization structure in which the entire principal is repaid at maturity, with only interest paid during the term — distinct from amortizing debt (e.g., scheduled annual principal repayment). Standard for institutional Term Loan B (7-year tenor with 1% annual amortization plus bullet), high-yield bonds (8-10Y bullet), and unitranche facilities. Bullet structures maximize free cash flow during the hold period for sponsor distributions or growth investment, at the cost of a refinancing event at maturity.
Bullet in plain English
A 'bullet' loan is one where you pay only interest along the way and hand back the entire borrowed amount in one lump at the very end. Contrast that with a normal loan (like a car loan), where each payment chips away at what you owe until it's gone — a bullet does almost none of that chipping until the final day. Why do it? Paying just interest keeps far more cash free during the life of the loan, which the owners can use for dividends or to grow the business. The trade-off: at the finish line you owe the whole principal at once, so you usually have to refinance — take out a fresh loan to pay off the old one.
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