For SBA lenders
Short answer
Transitioning a 7(a) loan from one permissible base rate to another (e.g., Prime to Term SOFR) requires a formal loan modification agreement executed by all parties and submitted to the SBA for approval if it constitutes a material change.
While the SBA permits various base rates, changing the base rate on an already authorized or disbursed loan is a material modification. It necessitates a formal loan modification agreement signed by the borrower and lender. If this change affects the loan terms or risk significantly, it may require prior SBA approval, and E-Tran must be updated.
A borrower with an existing 7(a) loan tied to the Prime Rate wishes to convert to Term SOFR to potentially lower their interest expense. The lender drafts a loan modification agreement, detailing the new base rate, corresponding spread, and effective date. This agreement is executed by the borrower and lender, and then submitted to SBA for approval as a major modification.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 57 - 7(a) Loan Servicing and Liquidation
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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