For SBA lenders
Short answer
A lender is permitted to request a prepayment penalty on 7(a) loans with maturities of 15 years or more, if the loan amount is greater than $50,000 and it is prepaid within the first three years.
SBA rules allow for prepayment penalties on 7(a) loans to compensate lenders for lost interest income on longer-term loans paid off early. This penalty applies only to loans with a maturity of 15 years or more, where the original loan amount exceeds $50,000, and only if the loan is prepaid within the first three years after disbursement. The penalty is calculated as a declining percentage of the outstanding principal (5% in year 1, 3% in year 2, 1% in year 3).
A borrower repays a $200,000 7(a) loan with a 20-year term exactly 18 months after disbursement. Since the loan is over $50,000 and has a term over 15 years, the lender can charge a 3% prepayment penalty on the outstanding principal at the time of repayment.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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