SBA 504 Prepayment Penalty Calculator

Simply enter your remaining debenture balance, the rate printed on the debenture, and the year you are in. SBA Form 1504 sets the premium as RP = D x (I x P): the balance, times the debenture rate as a decimal, times the factor for that year.

SBA 504 prepayment calculator

What the premium actually is

It is a share of the coupon, not of the principal. Almost every explanation skips that.

In year one the factor is 1.00, so the premium equals one full year of debenture interest. On a 6% debenture that is 6% of the balance. On a 3% debenture it is 3%.

So, for example, on a $1,000,000 balance in year four of a 20 year debenture, the factor is 0.70:

1,000,000 x (0.06 x 0.70) = $42,000

1,000,000 x (0.03 x 0.70) = $21,000

Same year, same balance, half the premium, because the coupon is half. Any page telling you the 504 penalty "starts at 10%" is wrong. No such schedule exists.

How the factor declines

Twenty and 25 year debentures share one schedule: 1.00, .90, .80, .70, .60, .50, .40, .30, .20, .10, then nothing from year 11. The 10 year debenture moves in 20 point steps, 1.00, .80, .60, .40, .20, then nothing from year 6.

Use the rate on the face of the debenture, not your effective rate. The effective rate carries CDC servicing and SBA fees that this formula never touches, and entering it overstates what you owe.

One quick note: prepayment is all or nothing, and you cannot pay down part of a 504 loan. It happens on a date the servicing agent sets each month, with at least 45 days of written notice and a non refundable $1,000 deposit wired 10 days ahead.

Your payoff also runs through the next semiannual debenture payment and picks up interest, SBA guarantee fees, servicing agent fees, and CDC servicing fees. The premium is one line of that statement, not the total.