SBA SOP 50 10 8.1, B.Ch6.D.2 — Note Terms:

SOP 50 10 8.1 B.Ch6.D.2

Effective 2026-10-01 · publisher's stamp for this provision

2. Note Terms: Note terms must include: a. All interest rate requirements including, if applicable, any interest-only payment period. b. The date of initial adjustment and the frequency of subsequent adjustments; c. Maturity date. d. Repayment terms: i. Lenders using the SBA Note are required to insert the repayment terms from the SBA Terms and Conditions into the Note. The repayment terms may be in any format as long as the information appears in the Note. ii. Lenders using their own Note form are required to comply with SBA repayment terms but are not required to use the specific language set forth in the SBA Terms and Conditions. e. Loans with a maturity of 15 years or more must contain prepayment/subsidy recoupment fee payable to SBA in accordance with 13 CFR § 120.223. f. State-specific language: Lender must ensure that any necessary state-specific provisions/language is contained in the appropriate loan documents. g. Repayment terms for CAPLine Loans: i. Interest only payments for any period exceeding the Borrower’s cash cycle, seasonal cycle, contract final payment date, or project completion date are not permitted. ii. Master Notes and Sub-Notes: Each loan will have a Master Note to cover the total loan amount and general repayment period. Lenders can also use a system of sub-notes to establish specific repayment periods for particular seasons, contract, or construction/renovation project. When the CAPLine will be used to finance the creation of more than one asset (such as the completion of two contracts) sub-notes should be used. The conditions of the sub-notes must not conflict with the conditions of the Master Note, except for variances in repayment schedules. See Paragraph D.4, Required SBA Forms, below. h. Escrow Policy for Commercial Real Estate Taxes and Insurance: i. The Borrower and Lender may agree to establish an escrow account for the purpose of collecting and paying real estate taxes, hazard insurance, and/or flood and earthquake insurance, when applicable; ii. The amount of money collected for an escrow account may not exceed 105% of the amount charged in the current year by the taxing authority or insurance company for the total requirement to pay the annual real estate taxes and insurance; iii. The account must be FDIC-insured and pay the Borrower a money market rate of interest, or the rate typically paid on escrow accounts for commercial real property on non-SBA guaranteed loans, whichever is greater; iv. Except for those items covered in subparagraphs h. ii and iii immediately above, the account must be consistent with accounts required of the Lender’s conventional Borrowers and the Lender must use similar procedures to administer the escrow accounts on its SBA loans as it does for its non-SBA guaranteed loans (SBLCs must be consistent with the practices followed by federally-regulated Financial Institutions); v. Lender must remit to the Borrower all accrued interest on the account and provide annual statements, unless otherwise required by state or Federal law; and vi. Upon termination of the account, the remaining funds must be returned to the Borrower within 15 business days. i. For loans being sold on the secondary market, in addition to the above: i. The date the complete loan application is received by SBA. This is the date the loan is approved and assigned an SBA loan number. ii. Initial interest rate as percent. iii. If Note interest rate fluctuates, full description of Base Rate, e.g., Prime Rate; Alternative Base Rate, e.g., SOFR; publication source, e.g., WSJ; spread over Base Rate as a percent; date of first fluctuation as either an exact date or a description of date, e.g., first calendar quarter following first disbursement; change period, e.g., calendar quarterly. iv. If applicable, interest rate ceiling and floor. v. Maturity as exact date or description of date, e.g., 300 months from date of Note. vi. First payment due date as either an exact date or a description, e.g., one month from date of Note. vii. Payment frequency, e.g., monthly viii. Payment due date, e.g., 14th of the month ix. Payment amount x. With regards to Borrower payment application: Lender will apply each installment payment first to pay interest accrued to the day Lender receives the payment, then to bring principal current, then to pay any late fees, and will apply any remaining balance to reduce principal. xi. Language covering prepayment: Notwithstanding any provision in this Note to the contrary, Borrower may prepay this Note. Borrower may prepay 20% or less of the unpaid principal balance at any time without notice. If Borrower prepays more than 20% and the Loan has been sold on the secondary market, Borrower must: a) Give Lender written notice; b) Pay all accrued interest; and c) If the prepayment is received less than 21 days from the date Lender receives the notice, pay an amount equal to 21 days' interest from the date lender receives the notice, less any interest accrued during the 21 days and paid under b., above. If Borrower does not prepay within 30 days from the date Lender receives the notice, Borrower must give Lender a new notice. xii. Subsidy Recoupment Fee language, if applicable: When in any one of the first three years following the date of first disbursement Borrower voluntarily prepays more than 25% of the outstanding principal balance of the loan, Borrower must pay to lender on behalf of SBA a prepayment fee for that year as follows: a) During the first year after the date of first disbursement, 5% of the total prepayment amount; b) During the second year after the date of first disbursement, 3% of the total prepayment amount; c) During the third year after the date of first disbursement, 1% of the total prepayment amount.

Source: SBA SOP 50 10 8.1, B.Ch6.D.2 — Note Terms: · source URL · snapshot 0fb0c4692cf52938