Glossary · The loan itself
Deferred Principal Payments
In short
A period during a loan's term where you only pay interest, and no principal. This reduces initial monthly payments, providing a grace period before full amortization begins.
What it means in a deal
Some SBA 7(a) loans may offer a short deferment period for principal payments, typically for the first few months. This can ease the cash flow burden during the initial transition of ownership. Understand the exact terms of any deferment period, as principal payments will resume and increase your monthly obligations thereafter.
Official sources
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Deferred Principal Payments
- If a seller note is structured with deferred principal payments but immediate interest payments, does it still qualify as full standby?
- What specific conditions allow a seller note with deferred principal payments but immediate interest to qualify as full standby?
- If a seller note has deferred principal payments but pays interest from day one, does it qualify as full standby?
- Can a seller note with deferred payments but no interest count as full standby for equity injection?
- How does the SBA handle a short-term deferral of principal payments at the start?
- Can a seller note be subordinate to the SBA loan but still receive principal payments?
Defined by CapBench 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.
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