{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/how-is-the-prepayment-penalty-calculated-for-an-sba-7-a-loan-that-exceeds-1-000-000-if-i-r","api_url":"https://dealroom.so/api/public/questions/how-is-the-prepayment-penalty-calculated-for-an-sba-7-a-loan-that-exceeds-1-000-000-if-i-r","question":"How is the prepayment penalty calculated for an SBA 7(a) loan that exceeds $1,000,000 if I repay it early?","topic":"Prepayment","audience":"borrower","bot_mode":"buyer","short_answer":"For SBA 7(a) loans exceeding $1,000,000, a prepayment penalty applies only if the loan is repaid within the first three years, and it's calculated on the outstanding principal balance.","rule":"If an SBA 7(a) loan has an original principal balance exceeding $500,000 (note: the question states $1,000,000, so it applies), a prepayment penalty can be assessed if the loan is fully repaid within the first three years. The penalty decreases over these three years: 5% in year 1, 3% in year 2, and 1% in year 3, calculated on the outstanding principal balance.","example":"If you have a $1,200,000 SBA 7(a) loan and decide to prepay the remaining $900,000 balance at the end of year 2, the prepayment penalty would be 3% of $900,000, totaling $27,000.","what_lenders_check":"Lenders must accurately calculate and apply the prepayment penalty according to SBA guidelines. They ensure borrowers are fully aware of these terms at loan origination, as specified in the loan authorization and note.","required_facts":["Prepayment penalty","Loan over $1,000,000","First three years","Outstanding principal","Decreasing 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":"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":"Prepayment penalty","url":"https://dealroom.so/glossary/prepayment-penalty"},{"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":"Tiered prepayment penalty","url":"https://dealroom.so/glossary/tiered-prepayment-penalty"}],"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":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/how-is-the-prepayment-penalty-calculated-for-an-sba-7-a-loan-that-exceeds-1-000-000-if-i-r","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."]}