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Borrowers

Pre-Payment Guidelines

CDC will provide a prepayment estimate upon request. Prepayments must be made by 9 a.m. Pacific Standard Time on the established prepayment date. Prepayments may only be made on certain days:

• 504 Loan – 3rd Thursday of the month.
• 503 Loan – 2nd or 4th Thursday of the month (except November and December – 1st or 3rd Thursday)

SBA requires written notice (through CDC) from the borrower at least 30 days in advance.  Written notice can be faxed to the attention of Margaret Roberson, 619-291-5185, and should include:

• The month and date of the 3rd Thursday you wish to payoff
• The loan number(s) and property address
• The borrower contact and fax number
• If a bank or escrow company will be handling the payoff, list their contact information
• Letter must be dated and signed by the borrower

Final prepayment figures are provided by the Central Servicing Agent approximately 3 days prior to the prepayment date for 504 loans, and on the day before the prepayment date for 503 loans.

Prepayment Premiums

504 loan
The premium is based on a declining scale over the first half of the loan.  The premium is adjusted every six months concurrent with the semi-annual debenture payments based on the balance of the loan at the six month intervals.  On a 20-year debenture, the premium in the first six months would be the annual interest on the beginning balance of the loan.  In the sixth month, the premium would be adjusted to the annual interest on the balance as of the sixth month.  In the second year, the premium would be 90% of the annual interest based on the loan balance at the beginning of the second year.  The premium would be recalculated in six months.  In the third year, the premium would be 80% of the balance at the beginning of the third year, adjusted at six months.  The premium declines in this manner over the ten year period so that in the tenth year, the premium is 10% of the annual interest.

503 loan
The premium/discount varies with current interest rates.  The closer the current rate to the debenture rate, the lower the premium.  If the debenture rate is lower than current rates, the loan will have a discount.

Prepaid Interest

Although a borrower may prepay a loan in any month with proper notice, the SBA cannot repurchase the debenture until the semi-annual payment date.  Therefore, when a borrower prepays a loan, the prepayment includes interest due up to and including the next semi-annual payment date.  For example, if a debenture’s semi-annual payments are due in January and June and the borrower prepays the loan in February, the prepayment will include interest due from February to June.  The optimal months to prepay are December or May.

Prepayment confirmation will be provided approximately 1 week following the prepayment date.  Reconveyance will be issued approximately 20 days following prepayment date.

Insurance must remain in force until the loan is paid in full.
If you have any questions regarding prepayment of loans originated by CDC Small Business Finance, call Margaret Roberson in CDC’s Servicing Department, 800-611-5170.