Glossary · The loan itself
Prepayment Event(Prepayment penalty)
In short
This occurs when you pay off your SBA 7(a) loan early. Depending on the loan terms and timing, it might trigger a prepayment penalty.
What it means in a deal
If your loan has a term of 15 years or more and you prepay more than 25% of the outstanding principal balance within the first three years, the SBA requires a prepayment penalty. Understand these terms; they could impact future refinancing or sale plans.
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 Event
- What happens if a significant post-closing event impacts the borrower's ability to repay an SBA 7(a) loan?
- How does a lender assess the impact of a significant post-closing event on the borrower's ability to repay a 7(a) loan?
- 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?
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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