Title: A Step-by-Step Guide to Making SBA Payments  | The Blueprint
Headings: Should You Pay Off an SBA Loan Early?
Should You Pay Off an SBA Loan Early?
Why would you prepay an SBA loan?
3 considerations before making an SBA prepayment
1. What is your interest rate savings?
2. What will your cash position look like?
3. What are your new covenants?
How to make an SBA prepayment
1. Engage your new lender
2. Get a payoff statement from your existing lender
3. Make the payment
To pay or not to pay
The Ultimate Guide to Building Virtual Teams

Content: For some, however, there comes a time when it makes sense to pay the loan off early. Let’s go over how that works and why you may want to do it. Why would you prepay an SBA loan? The most common reason for SBA loan prepayment is to refinance. When I worked with SBA loans, there was a cottage industry of people who would use an SBA loan to buy a hotel (because hospitality is often considered too risky for conventional lending), and then they would prepay the loan with a refinance after three to five years. These borrowers would spend the first three years turning around the hotel business to get the cash flow way up. That way, when they refinanced, the value of the hotel would be a lot higher and the debt service would be stable enough for conventional lending. They could reduce their rate by as many as three or four percentage points while also getting cash with the loan to further improve the hotel or put toward a new purchase. SBA loans have high interest rates, but if you had to get one because you had bad credit and can now save money with a better deal, it makes sense. There are also plenty of business owners who simply get the heebie-jeebies from having any debt and want to pay it off as soon as possible.