Glossary · The loan itself
Prepayment
In short
Prepayment means paying off your loan earlier than scheduled. While it sounds good, SBA 7(a) loans often have a prepayment penalty for early repayment in the first few years.
What it means in a deal
Be aware of any prepayment penalties in your SBA 7(a) loan agreement. These penalties usually apply if you pay off a substantial portion of the loan within the first three years. Factor this into your financial planning if you anticipate a quick resale or early debt repayment from excess cash flow.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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 Prepayment
- Are there prepayment penalties on an SBA 7(a) loan?
- When exactly do prepayment penalties apply to an SBA 7(a) loan?
- What triggers the application of the SBA 7(a) loan prepayment penalty?
- Are there specific loan sizes for which the prepayment penalty does not apply?
- Are there any prepayment penalties if I repay my SBA 7(a) loan early?
- Are there prepayment penalties if I pay off my SBA 7(a) loan early?
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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