The SBA Sets a Cap, Not a Price
SOP 50 10 8.1 says the lender negotiates the interest rate with you, subject to the SBA's maximum allowable rates. The SBA publishes ceilings. Your lender picks the number under them.
A 7(a) loan can carry a fixed or a variable rate. Either way, the SBA's rules set the most the lender can charge, and those rules override state interest rate laws.[1]
That is why no single "SBA rate" exists. Two borrowers with the same loan size can get two different quotes. Both are fine, as long as each one sits at or under the cap.
7(a) Variable Rate Maximums by Loan Size
Maximum variable rate = base rate plus: 6.5% for $50,000 or less, 6% for $50,001 to $250,000, 4.5% for $250,001 to $350,000, and 3% above $350,000.
The bigger the loan, the smaller the spread the SBA allows. The spreads come from the federal regulation, 13 CFR 120.214, and are repeated in the SOP.[2]
SBA 7(a) Maximum Variable Rate (SOP 50 10 8.1, 13 CFR 120.214)
| Loan amount | Maximum spread | Cap with prime at 7.00%* |
|---|---|---|
| $50,000 or less | Base rate + 6.5% | 13.50% |
| $50,001 to $250,000 | Base rate + 6.0% | 13.00% |
| $250,001 to $350,000 | Base rate + 4.5% | 11.50% |
| Over $350,000 | Base rate + 3.0% | 10.00% |
*Worked example only: prime at 7.00% per the Federal Reserve H.15 release, October 19, 2026. Rates change. The cap on your loan uses prime on the first business day of your application month.
For detailed calculations and real examples, see the FUNDED Series.
The spread written into your note stays the same for the life of the loan. The lender cannot change it without your written agreement.
What the Base Rate Is
SOP 50 10 8.1 allows two base rates, the Prime Rate or the SBA Optional Peg Rate, and three alternatives: SOFR, the 5-year Treasury or the 10-year Treasury. Every option is capped at the Prime-based maximum.
Most people know the Prime Rate. For SBA purposes it is the prime rate in effect on the first business day of the month, as shown in a national financial newspaper or website.[3] The SOP names the Wall Street Journal as an example. Your note has to name which publication your lender uses.
The Optional Peg Rate is a weighted average of what the federal government pays to borrow for terms like the average 7(a) loan. The SBA publishes it quarterly in the Federal Register.
A lender can also price off SOFR or a Treasury rate. Whichever it picks, the total rate cannot go above the cap that prime plus the allowed spread would produce.
Prime today
The Federal Reserve's H.15 release of October 20, 2026 shows the bank prime loan rate at 7.00% on every business day from October 13 through October 19, 2026.[4] Prime moves, so treat any cap on this page as a snapshot and check the current figure.
Which month counts
The starting cap is set by the base rate on the first business day of the month the SBA receives your complete application. The SOP defines that as the day the loan is approved and gets its SBA loan number.[5]
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Fixed Rate Maximums Are Published Separately
The fixed rate maximum is prime on the first business day of the month plus a spread the SBA sets in a Federal Register notice. It applies only if the rate never resets for the whole term.
The regulation says a 7(a) loan may have a reasonable fixed rate, and that the SBA publishes the maximum in the Federal Register from time to time.[6] The SOP points lenders to the SBA's Fiscal Transfer Agent wiki for the current list.
The catch is in one sentence of the SOP. A lender can use the fixed maximum only if that rate holds for the entire term, without adjustment or reset. If the rate is held for a few years and then floats, the variable caps apply instead.
Your Choice: Fixed or Variable
A fixed rate gives you a payment that never changes. A variable rate follows the base rate up and down. Lenders can also hold a variable rate for an opening period, cap and floor it, or switch it before the first disbursement with your written consent.
Fixed
The rate never changes, and the payment has to pay the loan off in full by maturity. The SBA does not allow balloon payments on a 7(a) loan. The trade-off: if rates fall, you keep paying the old rate unless you refinance.
Variable
The first change can come the month after your first disbursement, then no more often than monthly. Many lenders adjust quarterly. Each time the rate moves, the loan is usually re-amortized, so your payment changes too.[7]
The middle ground
A lender may delay the first adjustment. The SOP's example is a rate set for the first 5 years, then floating. A lender may also put a ceiling and a floor on the rate, as long as the floor sits at least as far below your note rate as the ceiling sits above it. On a 10% note with a 12% ceiling, the floor must be 8% or lower.
If rates move between approval and closing, you can ask to switch. Before the first disbursement, the lender may change the loan from variable to fixed or the other way, with your written consent, as long as the new rate stays under the maximum.
Your Choice: The Term
A longer term lowers the payment and raises the total interest. The SOP caps terms by what the money buys: 10 years for working capital, inventory and goodwill, generally 10 (up to 15) for equipment, and 25 years for real estate. A business purchase amortizes over 10 years, with real estate exceptions.
You don't pick any term you like. The rule is the shortest appropriate term for what the loan pays for and your ability to repay.[8] On a change of ownership, only the real estate portion can stretch past 10 years.
Take a $500,000 loan at the 10.00% cap from the table above, on two terms.
$500,000 at 10.00%: 10-Year vs 25-Year Term (illustrative)
| Term | Monthly payment | Total interest | Who can use it |
|---|---|---|---|
| 10 years | $6,608 | $292,904 | Working capital, goodwill, a business purchase |
| 25 years | $4,544 | $863,051 | Real estate only |
Arithmetic at the over-$350,000 cap with prime at 7.00% (H.15, October 19, 2026). Fully amortizing payments; your rate and term will differ.
For detailed calculations and real examples, see the FUNDED Series.
The 25-year payment is about $2,064 a month lighter. It also costs about $570,000 more in interest if you keep the loan to the end.
Long terms carry one more cost. On a loan of 15 years or longer, prepaying more than 25% in any one year during the first 3 years triggers a subsidy recoupment fee to the SBA: 5% of the prepayment in year one, 3% in year two, and 1% in year three.[9]
Why a Point Under the Cap Is Worth Asking For
On a $500,000, 10-year loan, a rate one point under the 10.00% cap cuts the payment by about $274 a month and the total interest by about $32,850.
At 9.00%, the same loan pays about $6,334 a month instead of $6,608. That 9.00% is only an illustration. Lenders set their own pricing, and your deal will be priced on its own risk.
One technical check is worth making. The SOP warns that a lender cannot pair the 365/360 interest accrual method with the maximum rate, because the effective annual rate would then exceed the SBA's limit. If your quote is at the cap, ask which accrual method the note uses.
The Guaranty Fee Is Part of the Cost
For FY2027, the 7(a) upfront fee is 2%, 3%, or 3.5% to 3.75% of the guaranteed portion, by loan size. On a $500,000 loan with a 75% guaranty, that is $11,250. It is 0% at $700,000 or less for manufacturers, listed food supply chain businesses and rural businesses.
The fee applies to 7(a) loans approved from October 1, 2026 through September 30, 2027, under SBA Information Notice 5000-881797. It is figured on the guaranteed portion, and the SBA's maximum guaranty is 85% on loans of $150,000 or less and 75% above that.
FY2027 SBA 7(a) Upfront Guaranty Fee (maturity over 12 months)
| Gross loan amount | Upfront fee on the guaranteed portion |
|---|---|
| $150,000 or less | 2% |
| $150,001 to $700,000 | 3% |
| $700,001 to $5,000,000 | 3.5% up to $1,000,000 guaranteed, plus 3.75% above |
| $700,000 or less: manufacturers, listed food supply chain, rural | 0% |
| 12 months or less | 0.25% |
Source: SBA Information Notice 5000-881797, effective October 1, 2026.
For detailed calculations and real examples, see the FUNDED Series.
Lenders also pay the SBA an annual service fee of 0.55% of the guaranteed balance. The notice says the lender may not pass that one on to you.
To see the upfront fee on your own loan amount, use the free SBA guaranty fee calculator.
SBA 504 Rates: Two Loans, Two Rates
The CDC's 504 loan rate is set by the SBA when the debenture is sold, based on long-term government debt. The bank's first lien loan has a rate you negotiate with the bank, and it must be reasonable.
A 504 loan finances real estate and major fixed assets. In the usual structure, a bank lends 50% or more, a Certified Development Company (CDC) lends up to 40%, and you put in the rest.
The CDC portion
The 504 loan is funded by a debenture. Its rate is set by the SBA and approved by the Secretary of the Treasury.[10] The SOP says the rate is based on market conditions for long-term government debt at the time of sale. The 10-year Treasury is the usual benchmark for 20- and 25-year debentures, and the 5-year Treasury for 10-year debentures.[11]
So the CDC rate on your loan reflects the market when the debenture is sold.
The bank portion
The bank's loan has to be at least as large as the 504 loan, run at least 7 years (10-year debenture) or 10 years (20- or 25-year debenture), and carry a reasonable interest rate. The regulation also has the SBA publish a maximum rate for these bank loans in the Federal Register. Within that, the rate is between you and the bank.
504 fees
For FY2027, the 504 upfront guaranty fee is 0.50%, and the annual service fee is 0.203% of the outstanding balance. Both are waived for manufacturers, listed food supply chain businesses and rural businesses, under SBA Information Notice 5000-881796.
How to Check an SBA Rate Quote
- 1
Find your loan-size tier
$50,000 or less, $50,001 to $250,000, $250,001 to $350,000, or over $350,000. The tier sets the maximum spread: 6.5%, 6%, 4.5% or 3%.
- 2
Look up the base rate
Ask which base rate the note uses (Prime, Optional Peg, SOFR or a Treasury rate) and which publication it comes from. For prime, use the rate on the first business day of the month your loan is approved.
- 3
Work out the cap
Add the base rate and the maximum spread. A variable quote must be at or under that number. For a fixed quote, the cap comes from the SBA's latest Federal Register notice.
- 4
Ask fixed or variable
If the rate is held for a period and then floats, ask how long, how often it adjusts after that, and whether there is a ceiling and floor.
- 5
Match the term to the use
10 years for working capital, goodwill and business purchases, up to 25 for real estate. A longer term lowers the payment and raises the total interest.
- 6
Add the guaranty fee
Apply the FY2027 fee to the guaranteed portion, or check whether your business qualifies for the 0% waiver.
- 7
Compare more than one lender
The SBA sets the ceiling, and each lender prices under it on its own terms. A second quote is the simplest way to know where yours sits.
Want the full walkthrough, with real deals worked step by step?
Get the FUNDED SeriesRelated SBA Lending Guides
- What Changed in SOP 50 10 8.1, the October 1, 2026 rule changes in one place
- SBA Loan Down Payment, how much you put down by deal type
- The SBA Loan Process, every step from first call to funding
- How Much Can You Borrow?, the program limits and what actually sizes your loan
- SBA 7(a) vs 504, which program fits your project
- SBA Loan Requirements, credit, equity, cash flow and experience
- Global DSCR for SBA Loans, the household cash flow test your payment has to pass
- SBA Guaranty Fee Calculator, the FY2027 fee on your loan
- The FUNDED Series, one SBA lending guide per industry