Glossary · The loan itself
Principal and interest
In short
These are the two main components of your loan payments. Principal reduces the loan balance, while interest is the cost of borrowing.
What it means in a deal
Each month, your SBA loan payment consists of a portion that pays down the principal balance and a portion that covers the interest accrued. Early in the loan term, more of your payment goes towards interest. Understanding this breakdown helps you project future debt service costs and cash flow.
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 Principal and interest
- Can a 7(a) lender approve a deferment of principal and interest payments without prior SBA approval?
- 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?
- If a seller note is structured with deferred principal payments but immediate interest payments, does it still qualify as full standby?
- If a seller provides a note for $100,000, can they receive principal or interest payments from the business during the SBA loan term?
- What is the difference between a fixed interest rate and a variable interest rate on an SBA 7(a) loan?
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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