SBA loan basics
Short answer
Variable interest rates are calculated by adding a fixed spread, or margin, to an approved base rate index, such as the Wall Street Journal Prime Rate.
Lenders choose a base rate index (e.g., Prime, Term SOFR) and add a specific margin, which varies based on the loan size, maturity, and risk profile. The SBA sets maximum allowable margins that lenders cannot exceed, ensuring competitive rates.
If the Prime Rate is 8.5% and the lender's approved margin for a $300,000 loan is 2.25%, the borrower's interest rate would be 10.75%. This rate would adjust if the Prime Rate changes.
Insider move
Lenders must clearly disclose the base rate and margin to the borrower and ensure the combined rate adheres to SBA maximums. They evaluate the borrower's risk to set an appropriate margin.
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
7(a) Alternative Base Rate Options
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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