Glossary · The loan itself
Principal payment
In short
The portion of your loan payment that reduces the actual amount of money you borrowed, separate from the interest. Each principal payment directly decreases your outstanding loan balance.
What it means in a deal
Your monthly loan payment consists of both principal and interest. Early in the loan term, a larger portion typically goes towards interest, gradually shifting to more principal as the loan amortizes. Understanding your principal payments helps you track debt reduction and overall financial health of the business post-acquisition.
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 Principal payment
- 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?
- If a seller note is structured with deferred principal payments but immediate interest payments, does it still qualify as full standby?
- If a seller note is on full standby, when can the seller start receiving principal payments?
- Can a 7(a) lender approve a deferment of principal and interest payments without prior SBA approval?
- If a seller note includes principal payments during the first year, can it still be used as equity?
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.