Additional principal payments to SBA loan

December 05, 2024

by a searcher from The University of Texas at Austin - Red McCombs School of Business in Houston, TX, USA

The business is healthy and I have showed them everything. I have excess cash in hand and a healthy cashflow coming in as well as healthy bookings for next year. I'm quite disappointed at my bank (a small regional bank).

The contract says if I want to make principal repayment exceeding 20% of loan value, I need to get bank's approval. I have been working patiently with the bank for several months, and have made several small additional principal payments, each one <5% of the loan. The bank is threatening to reverse my last payment. Do they have any ground in doing so? Are there any SBA guidelines, or how much discretion does the bank have in making such a decision based on their 'analysis/judgement'?

Reply by a searcher
from Columbia University in Sacramento, CA, USA

I think you find yourself in the enviable position of having a cash flowing business with a surplus of cash on hand. Even if you were able to freely paydown the bank debt, is that the optimal course of action? I imagine you probably have other growth opportunities you could invest in that may yield greater returns than paying down debt.

If your bank is unwilling to work with you they have shown their hand for what kind of partner they will be if times get tough. Invest your excess cash in the business, grow, and then re-finance with someone else that actually wants to work with you. You cannot view this current lender as a long-term partner and unless you are looking to operate debt-free I think you are best served looking elsewhere for the right lender.

Reply by a searcher
from Dominican University in Tampa, FL, USA

^redacted‌ have you tried asking perplexity.ai this question? I took a stab at for you and here's the results:
https://www.perplexity.ai/search/the-business-is-healthy-and-i-2hV3Zm89QT28e5iR5DhNCw

+16 more replies.

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