For SBA lenders
Short answer
Beyond the traditional Prime Rate, lenders can now choose from alternative base rates such as the Term SOFR, provided they comply with SBA requirements for transparency and consistency.
The SBA expanded the permissible base rates for variable interest rate 7(a) loans to provide lenders with more flexibility and align with broader market shifts away from LIBOR. Lenders must clearly disclose the chosen base rate to the borrower and apply it consistently.
A lender offers a 7(a) loan with an interest rate tied to the 1-month Term SOFR plus a margin, instead of the Prime Rate. The lender must ensure the loan authorization and note clearly specify Term SOFR as the base rate.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Alternative Base Rate Options
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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