October 21, 2026
Buying a Georgia Dental Office With an SBA 504 Loan
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If you are thinking about paying off an SBA 504 loan early, you probably want to know one thing first: what will it cost? The SBA 504 prepayment penalty in Georgia works differently from what many business owners expect. It is usually a declining charge that shrinks over time and often disappears in the second half of the loan term.
This guide explains how the 504 prepayment premium generally works, when it applies, and what to ask before you sign. Georgia Small Business Capital (GSBC) is a non-profit Certified Development Company (CDC) that has helped Georgia business owners with 504 financing for over 35 years, so these are questions we hear often.
Yes. SBA rules allow a borrower to prepay a 504 loan as long as the entire principal balance is paid, along with unpaid interest, any unpaid fees, and any prepayment premium set out in the note. You cannot make a one-time partial payment to cut the premium.
Think of it as an all-or-nothing option. You can sell the building, refinance, or pay it off with cash, but each of those means closing out the CDC loan in full.
The SBA 504 prepayment penalty is a fee, usually called a premium, that you may owe if you pay off the CDC loan early. It exists because of how the loan is funded. Your CDC loan is backed by a debenture, which is a bond that investors buy. Those investors are counting on interest payments over many years, and the premium helps make them whole if the loan ends early.
The premium is not a fixed number for every borrower. It is generally tied to the debenture rate and the remaining balance, and it is set out in your note. That is why two borrowers with similar loans can see different payoff costs.
The premium typically runs for the first half of the debenture term and steps down over that period. After that point, you can usually pay off the loan with no premium. Here is the general pattern.
Debenture TermTypical Premium PeriodTypical Cost After That Point10 years (equipment)About the first 5 yearsGenerally no premium20 years (real estate)About the first 10 yearsGenerally no premium25 years (real estate)About the first 12.5 yearsGenerally no premium
The 25-year row follows the same half-of-term pattern. Your note controls, so treat this table as a guide, not a promise. Ask your CDC for the exact schedule that applies to your loan.
A rough estimate takes three pieces of information: your remaining balance, the premium percentage that applies on your payoff date, and any unpaid interest and fees. The premium percentage is the part that declines over time.
Here is a hypothetical example. Say a dental practice owns a building and has a remaining CDC loan balance of $800,000. If the premium on the payoff date were 1.5 percent, the premium would be $800,000 x 0.015 = $12,000. That is on top of the balance, accrued interest, and fees. The same payoff a few years later, at a lower percentage, would cost less.
These numbers are only an illustration. Your actual premium depends on your note and the payoff date.
Possibly. In a typical 504 deal, a bank or credit union provides the first-lien loan, which usually covers about half of the project, and the CDC provides a second loan. The bank's loan has its own terms, and its prepayment rules are set by that lender, not by the SBA 504 program. Read both sets of documents before you plan an early payoff.
For a refresher on how the pieces fit, see our overview of the SBA 504 Loan Program.
It depends on why you want out. If you are selling the property, a payoff at closing is common. If you want a lower payment, it may be worth comparing the premium to your expected savings. Sometimes waiting until the premium falls makes more sense. Other times a different structure fits better. If your goal is to improve an existing loan, our SBA 504 Refinance Program may be a better route, depending on your situation.
Talk with your CPA or attorney about the tax and legal side of any payoff or sale. Those effects are specific to your business, and we cannot predict them for you.
In many cases, yes, with the approval of the lenders involved. If you plan to sell your business and the building, a buyer who qualifies may be able to take over the loan instead of triggering a payoff. Approval is not automatic, so raise this early with your CDC.
The 504 prepayment premium is real, but it is usually manageable and it tends to shrink as the years pass. Know what your note says, get a written payoff quote, and compare the cost to the benefit before you act.
If you own a building financed with a 504 loan, or you are planning one and want to understand the exit options, our team is glad to walk through it with you. Call Georgia Small Business Capital at 404-373-8601, or contact us online, and we will help you think it through anywhere in Georgia.
There can be. The CDC portion typically carries a premium that declines during the first half of the term. After that, early payoff generally has no premium. Your note sets the exact terms.
Generally, no. SBA rules call for prepayment of the entire principal balance rather than partial prepayments on the CDC loan. Ask your CDC to confirm how this works for your note.
Contact your CDC and request a written payoff statement. It should show the principal balance, accrued interest, any unpaid fees, and any premium for your planned payoff date.
In most cases, yes. The premium typically declines over the first half of the loan term, and after that point you can usually pay off the loan without it. Confirm the schedule in your loan documents.
Often it is possible with the required approvals, which can help if you are selling your business and building. Approval is not guaranteed, so start the conversation with your CDC early. You can also browse our 504 loan questions page for more answers.
