SBA 7(a) Prepayment: Check the Ledger Before Paying Extra

Start with a dated record of the loan and the proposed transaction, then ask the servicer to resolve any missing figures. Use the fictional worksheet below to organize your questions.

Start with a clearly labeled fictional case

Assume an SBA 7(a) loan with an original 20-year maturity. SBA servicing guidance specifies original maturity for the 15-year minimum.

Fictional dates: first disbursement June 10, 2025; payment October 20, 2026 (anniversary year two).

Fictional ledger: current and period-maximum principal $200,000; earlier voluntary prepayments $0; proposed extra principal $60,000.

These are stipulated facts, not figures taken from a borrower’s account. Before using this worksheet, replace each assumption with your own verified record.

Read the governing provision

13 CFR §120.223 aggregates voluntary extra-principal payments in each of the first three successive 12-month periods after first disbursement. Scheduled principal is excluded. Above 25% of that period’s highest outstanding principal, the fee covers all period prepayments: 5%, 3%, then 1%.

The SBA public overview instead summarizes the threshold as “25% or more” of outstanding balance. For this worksheet, use the regulation’s precise formulation and obtain the lender’s written calculation.

Calculate the conditional illustration

Current-balance screen: $60,000/$200,000=30%. Threshold: 25% × $200,000 = $50,000. Conditional second-year fee: 3% × $60,000 = $1,800.

Isolated cash subtotal: $61,800. Remaining principal: $140,000, not $138,200; the fee does not reduce principal.

That cash subtotal excludes the normal payment, accrued interest and any other applicable amounts. SBA’s servicing SOP, chapter 4 D, excludes accrued interest from prepayment principal and distinguishes SBA’s charge from prohibited lender prepayment penalties.

Change one record and check again

With a $250,000 period maximum, $60,000 is 24%; today’s $200,000 balance does not establish the trigger.

Alternatively, $20,000 earlier plus $40,000 now totals $60,000. At the $200,000 maximum, the conditional second-year fee totals $1,800.

Ask the lender to reconcile any fees already collected with its written total. Neither illustration recommends a payment amount or a payment-splitting strategy. Neither establishes your actual charge or any interest savings.

Build a one-page evidence card

This is an editorial worksheet for organizing a conversation, not a legally required document checklist. Keep supporting records private; you do not need to post account statements in comments.

• Loan identity: program, original note, original maturity and any amendments.
• Date evidence: first-disbursement confirmation and intended transaction date.
• Servicer’s period record: exact start and end dates, maximum principal figure, and the statement or ledger supporting it.
• Payment history: separate regular installments from extra principal; list earlier extra payments with dates and amounts.
• Proposed transaction: principal amount, funding availability and any other payments expected at the same time.
• Written quote: fee calculation, payment allocation, other amounts due and the quote’s expiration.

Mark each entry “documented,” “assumed,” or “needs clarification.” Give conflicting records their own line rather than choosing the figure that produces the lowest cost. Ask the servicer which record governs and retain its answer with the quote.

Compare costs only after resolving the records

Once the written payoff and cost figures are confirmed, a business refinancing cash-flow comparison can help organize the next question. That separate example excludes penalties, so do not copy its result into this case. Include your verified transaction costs in a fresh comparison.

General U.S. business-finance education, not a borrower-specific fee determination. Confirm the loan documents, applicable servicing treatment and payment instructions with your lender before sending funds.