Understanding SBA Loan Repayment Terms

#### Introduction

The repayment terms for SBA loans vary based on the type of loan, the purpose of the loan, and the specific agreement between the borrower and the lender. These terms are designed to provide flexibility and support to small businesses. Here’s a brief overview of the typical repayment terms for different type of SBA loans.

#### Standard 7(a) Loans

1. **Loan Purpose**: Working capital, equipment purchase, real estate acquisition, or business expansion.
2. **Repayment Terms**:
   - **Working Capital**: Up to 7 years.
   - **Equipment**: Up to 10 years.
   - **Real Estate**: Up to 25 years.
3. **Interest Rates**: Variable or fixed, depending on the lender and loan agreement.

#### SBA Express Loans

1. **Loan Purpose**: Short-term working capital, equipment purchase, or other immediate business needs.
2. **Repayment Terms**: Typically up to 7 years, but can vary based on the lender’s policies and the borrower’s agreement.
3. **Interest Rates**: Higher than standard 7(a) loans due to the expedited processing time.

#### SBA 504 Loans

1. **Loan Purpose**: Real estate purchases or major fixed assets like equipment.
2. **Repayment Terms**:
   - **Real Estate**: 10, 20, or 25 years.
   - **Equipment**: 10 or 20 years.
3. **Interest Rates**: Fixed rates for the CDC portion of the loan; variable or fixed for the lender portion.

#### Microloans

1. **Loan Purpose**: Small-scale financing needs, such as inventory, supplies, furniture, fixtures, and working capital.
2. **Repayment Terms**: Up to 6 years.
3. **Interest Rates**: Higher than other SBA loans, reflecting the smaller loan amounts and shorter terms.

#### Key Considerations

1. **Amortization**: SBA loans typically follow a fully amortizing schedule, meaning payments include both principal and interest, and the loan is paid off at the end of the term.
2. **Prepayment Penalties**: Some SBA loans may have prepayment penalties, especially if paid off within the first few years. It's essential to review the loan agreement for specific terms.
3. **Flexibility**: SBA loans offer flexibility in terms of use and repayment schedules, which can be tailored to meet the specific needs of the business.

#### Conclusion

SBA loans provide various repayment terms based on the loan type and purpose, offering flexibility to accommodate different business needs. Whether you need short-term working capital or long-term financing for real estate, understanding the repayment terms can help you make informed decisions and effectively manage your business finances.

At Atlantic Commercial Lending, a Licensed Commercial Mortgage Brokerage with an NMLS ID #2429887, we can help you navigate the SBA loan process and find the best terms for your business. Contact us today for personalized advice and to explore your financing options.