SBA 7(a) Q&A
Short answer
A prepayment penalty applies if you repay an SBA 7(a) loan with a term of 15 years or more within the first three years, and it's calculated on the outstanding balance.
For SBA 7(a) loans with maturities of 15 years or longer, a prepayment penalty is levied if 25% or more of the outstanding principal balance is prepaid in any one year during the first three years. The penalty is a declining percentage (5% in year 1, 3% in year 2, 1% in year 3).
If you have a $1,000,000 SBA loan with a 25-year term and pay it off entirely in year 2, the penalty would be 3% of the outstanding principal balance at that time. If you paid $500,000 of a $1,000,000 balance in year 1, the penalty would be 5% of $500,000.
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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