SBA rules · SOP 50 10 8.1

Is there a prepayment penalty on an SBA loan?

Prepayment fees apply to 7(a) loans with maturities of 15 years or longer through an SBA Subsidy Recoupment Fee during the first 3 years, while 504 prepayments require paying the debenture balance, accrued interest, and a repurchase premium.

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

In detail

7(a) Subsidy Recoupment Fee: For 7(a) loans with a maturity of 15 years or longer, voluntary prepayments of more than 25% of the loan in any one year during the first 3 years require a fee paid to SBA of 5% in year one, 3% in year two, and 1% in year three. This fee also applies if a loan under 15 years is extended to 15 years or more within its first 36 months.
Prohibited 7(a) lender fees: 7(a) lenders and their associates are strictly prohibited from charging separate prepayment fees to the borrower.
Secondary market 7(a) rules: A borrower may prepay 20% or less of a 7(a) loan at any time without notice, but prepaying more than 20% on a loan sold on the secondary market requires written notice and potentially up to 21 days of interest.
504 debenture prepayment: A 504 borrower may prepay the loan, where the debenture repurchase price equals the outstanding principal balance, plus accrued unpaid interest, plus a prepayment fee known as a repurchase premium.
504 calculation details: The specific formula for calculating the 504 repurchase premium is set forth in SBA Form 1504 and SOP 50 55 rather than inside SOP 50 10 8.1.

The source

What the SOP says

“For loans with a maturity of 15 years or longer, the Borrower must pay to SBA a Subsidy Recoupment Fee when the Borrower voluntarily prepays more than 25% of its loan in any 1 year during the first 3 years after first disbursement. The fee is 5% of the prepayment amount during the first year, 3% the second year, and 1% in the third year. The Subsidy Recoupment Fee would also apply to any loan originally made with a maturity of less than 15 years, when the maturity is extended to 15 years or more during the first 36 months of the loan.

SOP 50 10 8.1, Chapter 4: Ethics, Fees, and Agents > Fees the Borrower Pays to SBA (lines 1000-1002)✓ Verified

“Charge prepayment fees;

SOP 50 10 8.1, Chapter 4: Ethics, Fees, and Agents > Prohibited Fees (lines 1003-1010)✓ Verified

“Borrower may prepay 20% or less of the unpaid principal balance at any time without notice.

SOP 50 10 8.1, Chapter 6: SBA Terms and Conditions through Disbursement for all 7(a) Loans > Payment frequency, e.g., monthly (lines 2946-2954)✓ Verified

“The Borrower may prepay its 504 loan. The repurchase price of the Debenture shall be an amount equal to the outstanding principal balance of the Debenture, plus interest accrued and unpaid thereon to the repurchase date, plus a prepayment fee, known as a repurchase premium (“RP”).

SOP 50 10 8.1, Chapter 2: SBA Terms and Conditions through Disbursement > Prepayment: (lines 3950-3956)✓ Verified

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