How To Repay Your SBA Loan

Small business owners that navigate the complex and lengthy Small Business Administration loan process are rewarded with low-cost, long-term business funding. Now that the hard part is over, it’s not uncommon to have questions about what comes next, like repaying your loan.

If you have questions about SBA loan repayment, you’re in the right place. Keep reading to learn more about how to repay your loan, the penalties for paying your loan early, and what to do if you’re at risk of missing a payment.

Understand Your SBA Loan Repayment Terms

SBA loans are repaid on a monthly basis. The length of your repayment term varies by the type of loan, how funds are being used, and other factors. Here’s a breakdown of the maximum repayment terms for SBA loans.

SBA Loan Prepayment Penalties

Paying your SBA loan off early seems like a good idea — until you realize that prepayment penalties may apply. A prepayment penalty is a fee that is charged when you pay all or a portion of your loan early.

Under the SBA 7(a) program, a prepayment penalty applies for loans with repayment terms of at least 15 years if:

• You make a prepayment within the first three years after the first loan disbursement
• You voluntarily prepay at least 25% of your outstanding balance

Prepayment penalties for 7(a) loans are:

• 5% of the prepayment amount during the first year after disbursement
• 3% of the prepayment amount during the second year after disbursement
• 1% of the prepayment amount during the third year after disbursement

Prepayment penalties also apply to the CDC portion of the SBA CDC/504 loan that has terms of at least 20 years. These penalties apply for the first half of the year, declining each year until reaching 0% at the 11-year mark.

There are no prepayment penalties for Disaster loans and Microloans.

How To Make Your SBA Loan Payments

In most cases, you will make your SBA loan payment directly to your lender. Most lenders offer multiple ways to pay your loan, including:

• Debit cards
• ACH & eChecks
• Paper checks
• Pay by phone
• In-person cash payments
• Bill Pay services
• Automatic recurring payments

Payment methods vary by lender, so check your loan contract or contact your lender to find out how to make your monthly payment.

For some loans, you may be eligible to use the MySBA Loan Portal.

How To Make Payments Using The MySBA Loan Portal

Some borrowers may be eligible to make payments through the MySBA Loan Portal. Eligible loans include:

• SBA Disaster Loans
• COVID-19 EIDL loans
• Guarantee-purchased SBA-serviced 7(a) loans
• Debenture-purchased 504 loans

Borrowers with these types of loans can log in to make a one-time payment or sign up for recurring payments. Borrowers can also access use the portal to check the status of SBA loans and access loan information, including loan numbers, due dates, and loan balances.

You can use your Capital Access Financial System (CAFS) or Veteran Small Business Certification (VetCert) login information to sign into the portal. Otherwise, you can register for a new account. If you have any issues during the process, you can contact the SBA for assistance.

What To Do If You Can’t Make Your SBA Loan Payment

Failure to pay your SBA loan results in delinquency. Once your loan has been delinquent for approximately 90 to 120 days, you will default on your SBA loan.

Defaulting on your SBA loan comes with serious consequences, including:

• Seizure of business collateral
• Seizure of personal assets
• Wage garnishments
• Civil lawsuits

It’s extremely important that you make your SBA loan payment on time each month. However, if you find yourself unable to make your loan payments, contact your lender immediately. Modified repayment plans or other options may be available to you. If your lender is unresponsive, you can contact the SBA directly for further guidance.

The Bottom Line On SBA Loan Repayment

As with any other debt, it’s important to make your monthly SBA loan payments on time, every time. Fortunately, many lenders make it very easy to make your payments, even offering recurring payment options so you don’t overlook a due date.

Be sure to reach out to your lender about payment options, due dates, and other questions about your small business loan. If you find yourself in a financial crunch and are unable to make your SBA loan payment, you should also contact your lender right away to find a solution to keep your loan on track.