SBA loan basics
Short answer
The Prime Rate is a widely published commercial lending benchmark, while the SBA Optional Peg Rate is an alternative base rate calculated by the SBA and often used for smaller, simpler 7(a) loans.
Lenders can choose to peg their variable interest rates to several base rates. The Wall Street Journal Prime Rate is common, representing the rate banks charge their most creditworthy customers. The SBA Optional Peg Rate is another variable base rate, calculated quarterly by the SBA, which can be a simpler option for lenders and borrowers, especially for smaller loans.
A lender might offer a loan at Prime + 2.0%. If Prime is 8.5%, the rate is 10.5%. Another lender might offer a similar loan at the SBA Optional Peg Rate + 2.0%. If the Peg Rate is 8.0%, the rate is 10.0%. Both are variable but based on different benchmarks.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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