For SBA lenders
Short answer
Permissible alternative base rates for variable rate 7(a) loans include the Prime Rate, Term SOFR (Secured Overnight Financing Rate) with a spread, and potentially other indices approved by SBA.
While the Wall Street Journal Prime Rate has historically been a common base rate, the SBA has expanded options to include Term SOFR, adjusted with a spread, to reflect market changes. Lenders must select a transparent, verifiable base rate that is widely published and not controlled by a single entity.
A lender offers a 7(a) loan with a variable interest rate tied to Term SOFR + 3.00%. The lender documents that Term SOFR is a permissible base rate under current SBA policy and that the spread is within SBA maximums.
Insider move
Lenders must ensure the chosen base rate is permissible by the SBA and that the rate calculation (base rate + spread) adheres to maximum allowable rates. Any unauthorized base rate or excessive spread could jeopardize the guaranty.
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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