Amortization is the process of spreading the cost of an asset over a period of time, typically by making regular payments that include both principal and interest. This is often done for tangible assets, such as equipment or real estate, and intangible assets, such as patents and trademarks.
Amortization is most commonly used for loans and mortgages, where the borrower makes regular payments to the lender to pay off the loan over time.
The regular payments are typically structured so that a larger portion of the payment is applied to interest in the early years, and a larger portion is applied to the principal in the later years. This helps to reduce the overall cost of borrowing by spreading the expense over a longer period of time.
Amortization in a startup refers to the process of spreading the cost of an asset, such as equipment or intellectual property, over a period of time. This is typically done by making regular payments, such as monthly or annual payments, that are applied to both the principal and interest of the asset.
Amortization is often used in startups to spread the cost of expensive assets over a period of time, making them more manageable for the company's cash flow. It also helps to match the expense with the revenue generated by the asset over the same period of time.