{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/how-are-prepayment-penalties-calculated-if-an-sba-7-a-loan-is-paid-off-early","api_url":"https://dealroom.so/api/public/questions/how-are-prepayment-penalties-calculated-if-an-sba-7-a-loan-is-paid-off-early","question":"How are prepayment penalties calculated if an SBA 7(a) loan is paid off early?","topic":"Guaranty Fees","audience":"lender","bot_mode":"lender","short_answer":"Prepayment penalties apply to 7(a) loans with terms of 15 years or more that are paid off within the first three years, based on the outstanding principal balance.","rule":"SBA 7(a) loans with original maturities of 15 years or more are subject to a prepayment penalty if paid in full within the first three years. The penalty is calculated as a percentage of the outstanding principal balance: 5% in the first year, 3% in the second year, and 1% in the third year. This penalty compensates the SBA for the loss of its guaranty fee income.","example":"A borrower has a $900,000 SBA 7(a) loan with a 10-year term. If they pay it off in year two, no prepayment penalty applies because the original term was less than 15 years. If the term was 15 years and they paid it off in year two with an outstanding balance of $800,000, the penalty would be 3% of $800,000, or $24,000.","what_lenders_check":"Lenders must accurately disclose prepayment penalties to borrowers and ensure proper calculation and collection if a loan is paid off early. Failure to do so could result in a repair to the SBA guaranty.","required_facts":["Loan term","Payoff timeframe","Outstanding principal","Penalty percentage"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","7(a) Loan Program Terms, Conditions, and Eligibility"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"},{"title":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"related_questions":[{"question":"How does a lender ensure compliance with the '90-day rule' for guaranty fee payment for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-ensure-compliance-with-the-90-day-rule-for-guaranty-fee-payment-for-a-7-"},{"question":"When are the annual service fees for 7(a) loans due from lenders to the SBA?","url":"https://dealroom.so/for-lenders/questions/when-are-the-annual-service-fees-for-7-a-loans-due-from-lenders-to-the-sba"},{"question":"What is the prepayment penalty calculation for a 7(a) loan with a principal balance exceeding $500,000?","url":"https://dealroom.so/for-lenders/questions/what-is-the-prepayment-penalty-calculation-for-a-7-a-loan-with-a-principal-balance-exceedi"},{"question":"When is the upfront SBA guaranty fee typically due and how is it calculated for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/when-is-the-upfront-sba-guaranty-fee-typically-due-and-how-is-it-calculated-for-a-7-a-loan"},{"question":"Are there any ongoing annual fees that a lender must pay to the SBA for their 7(a) loan portfolio?","url":"https://dealroom.so/for-lenders/questions/are-there-any-ongoing-annual-fees-that-a-lender-must-pay-to-the-sba-for-their-7-a-loan-por"},{"question":"How does a lender calculate the ongoing servicing fee (annual service fee) due to the SBA for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-calculate-the-ongoing-servicing-fee-annual-service-fee-due-to-the-sba-fo"}],"related_terms":[{"term":"SBA 7(a) loan guaranty","url":"https://dealroom.so/glossary/sba-7-a-loan-guaranty"},{"term":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-loan"},{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"SBA 7(a) Loan Program","url":"https://dealroom.so/glossary/sba-7-a-loan-program"},{"term":"SBA 7(a) program","url":"https://dealroom.so/glossary/sba-7-a-program"},{"term":"Standard 7(a) loan","url":"https://dealroom.so/glossary/standard-7-a-loan"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/how-are-prepayment-penalties-calculated-if-an-sba-7-a-loan-is-paid-off-early","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}