SBA 504 Pre-Payment

Guidelines regarding prepaying SBA 504 loans are as follows:

  • Company needs to notify BLP, in writing, by the 1st of the month in which they wish to prepay their SBA 504 loan.
  • Prepayment penalties may apply. Prepayment penalty levels decline at six (6) month intervals and are eliminated once half of the term has passed
  • The prepayment penalty is an amount equal to the outstanding principal balance plus accrued interest plus a repurchase premium (RP).
    • RP = D(I x P)
    • D = the remaining principal balance
    • I = interest rate stated on the face of the debenture expressed in decimal points
    • P = the factor set as shown below for the applicable year

    P Table Value Chart

    20-Year Loan

    0-1

    1-2

    2-3

    3-4

    4-5

    5-6

    6-7

    7-8

    8-9

    9-10

    10 and after

    P

    1.00

    .90

    .80

    .70

    .60

    .50

    .40

    .30

    .20

    .10

    0

    10-Year Loan

    0-1

    1-2

    2-3

    3-4

    4-5

    5 and after

    P

    1.00

    .80

    .60

    .40

    .20

    0

Example: $200,000 remaining principal balance, 6.5% interest rate, paying off after 8 years on a 20 year loan. Calculation as follows:

RP = $200,000(.065 x .20) = $2,600

Loan Prepayment Amount =  $2,600 + $200,000(remaining balance) + interest accrued (if any)