Glossary · The loan itself
In short
Compound interest means that interest is calculated not only on the initial principal but also on the accumulated interest from previous periods. This makes the total debt grow faster.
While most SBA 7(a) loans have simple interest calculated on the outstanding principal, understanding compounding is crucial if you encounter any deferment periods or if interest is allowed to accrue without payment. In such cases, your total debt load can increase significantly faster than with simple interest, making eventual repayment more costly.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
See which SBA lenders would fund your deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to approve a 7(a) like yours and flag what trips up approval.
Free · No documents · Usually same-day