SBA 7(a) Q&A
Short answer
An SBA 7(a) loan has a prepayment penalty only if the original term is 15 years or more and the loan is paid off within the first three years, calculated based on the outstanding principal balance.
The prepayment penalty applies only to SBA 7(a) loans with a maturity of 15 years or longer. The penalty decreases over the first three years: 5% of the outstanding principal balance in year 1, 3% in year 2, and 1% in year 3. There is no prepayment penalty after the third year or for loans with terms less than 15 years.
You have a 15-year SBA 7(a) loan with an original principal of $1,000,000. If you pay it off entirely in month 18 (within year 2) when the outstanding principal is $900,000, the prepayment penalty would be 3% of $900,000, which is $27,000.
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 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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