{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-specific-conditions-apply-to-the-prepayment-penalty-on-7-a-loans-exceeding-2-500-000-","api_url":"https://dealroom.so/api/public/questions/what-specific-conditions-apply-to-the-prepayment-penalty-on-7-a-loans-exceeding-2-500-000-","question":"What specific conditions apply to the prepayment penalty on 7(a) loans exceeding $2,500,000 with terms of 15 years or more?","topic":"Guaranty fees","audience":"lender","bot_mode":"lender","short_answer":"A prepayment penalty applies to 7(a) loans with a maturity of 15 years or more and an original principal amount exceeding $2,500,000, if prepaid within the first three years.","rule":"13 CFR 120.222 specifies the prepayment penalty rules. For larger, longer-term loans, a penalty is imposed if the borrower voluntarily prepays 25% or more of the outstanding principal balance within the first year, 10% within the second year, and 5% within the third year. This encourages borrowers to retain the loan for a longer period.","example":"A borrower has a $3,000,000 7(a) loan with a 20-year term. If they prepay $1,000,000 in the second year, they would incur a 10% penalty on the prepaid amount, as it exceeds 25% of the original principal for that year.","what_lenders_check":"Lenders must clearly communicate the prepayment penalty terms to borrowers and ensure they are accurately documented in the loan authorization. Incorrect application or calculation of this penalty can lead to borrower disputes and SBA scrutiny.","required_facts":["Loan amount > $2.5M","Term > 15 years","Prepayment within 3 years","Specific percentages","Voluntary prepayment","Authorization terms"],"source_families":["13 CFR Part 120 - Business Loans","SOP 50 10 - Lender and Development Company Loan Programs","7(a) Loan Program Terms, Conditions, and Eligibility"],"official_sources":[{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"},{"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":"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 is the upfront guaranty fee calculated for a 7(a) loan of $500,000 for FY2026?","url":"https://dealroom.so/for-lenders/questions/how-is-the-upfront-guaranty-fee-calculated-for-a-7-a-loan-of-500-000-for-fy2026"},{"question":"What is the process for a lender to remit the SBA upfront guaranty fee after loan closing?","url":"https://dealroom.so/for-lenders/questions/what-is-the-process-for-a-lender-to-remit-the-sba-upfront-guaranty-fee-after-loan-closing"},{"question":"How does the SBA calculate the 7(a) loan guaranty fee when the loan amount is precisely $1,000,000 for FY2026?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-calculate-the-7-a-loan-guaranty-fee-when-the-loan-amount-is-precisely-1-0"},{"question":"When is the ongoing SBA servicing fee (annual service fee) for a 7(a) loan typically collected from the lender?","url":"https://dealroom.so/for-lenders/questions/when-is-the-ongoing-sba-servicing-fee-annual-service-fee-for-a-7-a-loan-typically-collecte"},{"question":"How do the upfront SBA guaranty fees differ for 7(a) loans between $150,001 and $700,000 for FY2026?","url":"https://dealroom.so/for-lenders/questions/how-do-the-upfront-sba-guaranty-fees-differ-for-7-a-loans-between-150-001-and-700-000-for-"},{"question":"How do the ongoing annual service fees for 7(a) loans impact the lender's accounting and remittance to SBA?","url":"https://dealroom.so/for-lenders/questions/how-do-the-ongoing-annual-service-fees-for-7-a-loans-impact-the-lender-s-accounting-and-re"}],"related_terms":[{"term":"Prepayment penalty","url":"https://dealroom.so/glossary/prepayment-penalty"},{"term":"Tiered prepayment penalty","url":"https://dealroom.so/glossary/tiered-prepayment-penalty"},{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"Conditions precedent to closing","url":"https://dealroom.so/glossary/conditions-precedent-to-closing"},{"term":"Prepayment","url":"https://dealroom.so/glossary/prepayment"},{"term":"SBA 7(a) program","url":"https://dealroom.so/glossary/sba-7-a-program"}],"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/what-specific-conditions-apply-to-the-prepayment-penalty-on-7-a-loans-exceeding-2-500-000-","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."]}