SBA rules · SOP 50 10 8.1

Can an SBA loan have interest-only payments?

Initial interest-only payment periods are permitted on general 7(a) loans and under certain EWCP options, but they are restricted on CAPLines, prohibited from creating balloon payments, and not authorized for 504 debentures.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

General 7(a) loans: Note terms must include any applicable interest-only payment period, but balloon payments are prohibited and the loan must fully amortize by maturity.
CAPLines restrictions: On CAPLines, interest-only payments cannot exceed the borrower's cash cycle, seasonal cycle, contract final payment date, or project completion date, and Working Capital CAPLines have no provision for interest-only payments.
Export Working Capital Program: Lenders may structure EWCP facilities with interest-only payments on outstanding balances as an explicit repayment option.
504 debentures: The SOP establishes 10, 20, or 25 year fully amortizing maturities and does not authorize interest-only periods on the debenture itself, although interest payments may occur during interim construction financing before debenture funding.

The source

What the SOP says

“All interest rate requirements including, if applicable, any interest-only payment period.

SOP 50 10 8.1, Chapter 6: SBA Terms and Conditions through Disbursement for all 7(a) Loans > Disbursement Period: (lines 2915-2923)✓ Verified

“SBA does not allow balloon payments. A fixed interest rate loan must use a payment that will fully amortize the loan by the maturity date.

SOP 50 10 8.1, Appendix 18: 7(a) Interest Rate Requirements > Amortization: (13 CFR § 120.214(e)): (lines 5523-5524)✓ Verified

“Interest only payments for any period exceeding the Borrower’s cash cycle, seasonal cycle, contract final payment date, or project completion date are not permitted.

SOP 50 10 8.1, Chapter 6: SBA Terms and Conditions through Disbursement for all 7(a) Loans > State-specific language (lines 2928-2930)✓ Verified

“There is no provision for interest only payments. Interest must be paid at least monthly either from Borrower’s own resources OR from loan proceeds at the time of an advance.

SOP 50 10 8.1, Chapter 4: 7(a) CAPLines > Limit advances to the following types of inventory: (lines 2266-2274)✓ Verified

“Option 2: Interest-only payments on outstanding balances.

SOP 50 10 8.1, Chapter 5: 7(a) Export Trade Finance > Loan Terms (lines 2457-2461)✓ Verified

“Maturity of the 504 loan is 10, 20, or 25 years based upon the remaining useful life of the property being financed as follows:

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Loan Maturities (lines 3385-3392)✓ Verified

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