Glossary · The loan itself
Principal Deferral
In short
A temporary period during which a borrower only pays interest on a loan, with no payments made towards the principal balance.
What it means in a deal
In some 7(a) loan structures, particularly for startups or businesses needing time to ramp up, a short period of principal deferral might be negotiated. This can ease initial cash flow pressure. However, interest still accrues, and the principal payments will eventually begin, often resulting in slightly higher payments later or a longer amortization period.
Related terms
Common questions about Principal Deferral
- How does the SBA handle a short-term deferral of principal payments at the start?
- What happens to an SBA loan if a principal owner or guarantor dies unexpectedly?
- What if a principal has a recent criminal history that is not a felony?
- If a seller note is on full standby, when can the principal repayments legally begin?
- Can a seller note be subordinate to the SBA loan but still receive principal payments?
- What is the required personal ownership percentage to be considered a 'principal' by the SBA?
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.
See which SBA lenders would fund your deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to approve a 7(a) like yours and flag what trips up approval.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.