Additional principal payments to SBA loan

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by a searcher from The University of Texas at Austin - Red McCombs School of Business
in Houston, TX, USA

1yr ago

Additional principal payments to SBA loan

The business is healthy and I have showed them everything. I have excess cash in hand and a healthy cashflow coming in as well as healthy bookings for next year. I'm quite disappointed at my bank (a small regional bank).

The contract says if I want to make principal repayment exceeding 20% of loan value, I need to get bank's approval. I have been working patiently with the bank for several months, and have made several small additional principal payments, each one <5% of the loan. The bank is threatening to reverse my last payment. Do they have any ground in doing so? Are there any SBA guidelines, or how much discretion does the bank have in making such a decision based on their 'analysis/judgement'?

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reply by a lender 1yr ago
from University of North Carolina at Wilmington in Argyle, WI 53504, USA

Assuming there is no prepayment penalty, that verbiage is included in the event the guaranteed portion is sold on the secondary market. Many/most lenders sell the gtd portion to generate income/liquidity, and as such are required to provide notice to the secondary market investor.

reply by an intermediary 1yr ago
from University of Aberdeen in Chicago, IL, USA

Check your terms of the SBA, normally there is a sliding early payment pentalty of 3% 2% 1% each of the first few years as they need to cover the cost of closing on the loan. After that there should not be any pre payment penalties. They should not threaten to reverse the payments, they should just charge you a penalty if that is the terms. Check the terms of the SBA agreement at loan origination.