Can an SBA loan have a balloon payment?
Short answer
No. SBA does not allow balloon payments on 7(a) loans, under 13 CFR § 120.214(e) and SOP 50 10 8.1, Appendix 18. A 7(a) loan can, however, refinance balloon debt you already have.
13 CFR § 120.214(e) says SBA does not allow balloon payments. SOP 50 10 8.1, Appendix 18, AmortizationPaying a loan down on a schedule, so each payment covers interest and part of the balance. Full definition (about p. 399) repeats that rule. Appendix 15, Para. B.1 (p. 370) applies it to change of ownership loans.
Revolving and construction lines follow their own repayment rules
- An SBA Express revolving loan over 12 months must have a term-out period at least as long as its draw period (Appendix 17, Para. B.3).
- An SBA Express revolving loan of 12 months or less may start without a term-out.
- A Manufacturers' Access to Revolving Credit (MARC) line must convert to a fully amortizing loan after its revolving period (Appendix 17, Para. B.4).
- A Builders CAPLine may repay a project with a single principal payment (Section B, Chapter 4, Para. F, about p. 157).
Balloon debt you already have
A 7(a) loan may refinance debt structured with a demand note or balloon payment (Appendix 14, Para. A.1, p. 355). Such debt is excepted from the rule that new payments be at least 10% lower.
Other tests still apply:
- The debt must be current for at least the last 12 months or the life of the loan, whichever is less.
- SBA-guaranteed proceeds may not pay a creditor in a position to sustain a loss.
- A loan that matured and went unpaid for more than 29 days is not current and cannot be refinanced.
Sources
- 13 CFR § 120.214(e), Amortization
- SOP 50 10 8.1, App. 18, Para. A, Amortization (about p. 399)
- SOP 50 10 8.1, App. 15, Para. B.1 (p. 370)
- SOP 50 10 8.1, App. 14, Para. A (p. 355) and Ten Percent Improvement (about p. 356)
- SOP 50 10 8.1, App. 17, Para. B.3 (p. 391) and B.4 (about p. 392)
- SOP 50 10 8.1, Sec. B, Ch. 4, Para. F, Builders CAPLines (about p. 157)
Ask lending partners about your loan
Tell us the amount you need and what it is for. We refer you to lenders that may fund businesses like yours, and it costs you nothing.
Janover Capital LLC is not a lender and is not the SBA. The lender makes the credit decision. A lender or marketplace may pay us a referral fee if we connect you, at no cost to you. Advertiser disclosure.