{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/how-are-prepayment-penalties-calculated-if-i-pay-off-my-900-000-sba-7-a-loan-early","api_url":"https://dealroom.so/api/public/questions/how-are-prepayment-penalties-calculated-if-i-pay-off-my-900-000-sba-7-a-loan-early","question":"How are prepayment penalties calculated if I pay off my $900,000 SBA 7(a) loan early?","topic":"Prepayment","audience":"borrower","bot_mode":"buyer","short_answer":"Prepayment penalties apply only to SBA 7(a) loans with terms of 15 years or more, and if more than 25% of the outstanding balance is paid in any one year during the first three years.","rule":"For loans with terms of 15 years or longer, a prepayment penalty is imposed if the borrower voluntarily prepays more than 25% of the outstanding principal balance in any one of the first three years of the loan. The penalty decreases over these three years: 5% in year 1, 3% in year 2, and 1% in year 3, applied only to the amount exceeding 25% of the outstanding principal balance.","example":"A buyer has a $900,000 SBA 7(a) loan with a 25-year term. If, in year 2, they make a $300,000 principal payment (exceeding 25% of the outstanding balance, which might be around $675,000 at that point), a 3% penalty would apply to the amount over the 25% threshold.","what_lenders_check":"Lenders clearly disclose the prepayment penalty terms to borrowers upfront. They track prepayments to ensure compliance with SBA rules and accurately calculate any applicable penalties, which are then remitted to the SBA.","required_facts":["Prepayment penalty","Loan term","Early repayment","Calculation method","First three years"],"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":"If I pay off my $500,000 SBA 7(a) loan within one year, will I incur any prepayment penalties?","url":"https://dealroom.so/sba-7a/questions/if-i-pay-off-my-500-000-sba-7-a-loan-within-one-year-will-i-incur-any-prepayment-penalties"},{"question":"For an SBA 7(a) loan, what minimum principal amount must be paid off to trigger a prepayment penalty?","url":"https://dealroom.so/sba-7a/questions/for-an-sba-7-a-loan-what-minimum-principal-amount-must-be-paid-off-to-trigger-a-prepayment"},{"question":"Are there prepayment penalties on an SBA 7(a) loan if I pay it off early?","url":"https://dealroom.so/sba-7a/questions/are-there-prepayment-penalties-on-an-sba-7-a-loan-if-i-pay-it-off-early"},{"question":"If I sell the business, does the new owner inherit the prepayment penalty obligation for the SBA loan?","url":"https://dealroom.so/sba-7a/questions/if-i-sell-the-business-does-the-new-owner-inherit-the-prepayment-penalty-obligation-for-th"},{"question":"Does a prepayment penalty apply if the SBA 7(a) loan is refinanced into another SBA loan?","url":"https://dealroom.so/sba-7a/questions/does-a-prepayment-penalty-apply-if-the-sba-7-a-loan-is-refinanced-into-another-sba-loan"},{"question":"Is there a prepayment penalty for early repayment of my SBA 7(a) loan if the principal balance is under $500,000?","url":"https://dealroom.so/sba-7a/questions/is-there-a-prepayment-penalty-for-early-repayment-of-my-sba-7-a-loan-if-the-principal-bala"}],"related_terms":[{"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) loan guaranty","url":"https://dealroom.so/glossary/sba-7-a-loan-guaranty"},{"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/sba-7a/questions/how-are-prepayment-penalties-calculated-if-i-pay-off-my-900-000-sba-7-a-loan-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."]}