Last updated: October 16, 2026
A good business loan rate is one at or below what an SBA 7(a) loan of the same size could cost you. In 2026, SBA caps variable 7(a) rates at a base rate plus 3.0% to 6.5%, depending on loan size. Bank loans to strong borrowers often price lower; online loans and merchant cash advances usually cost far more. Always compare APR and total dollars repaid.
SBA 7(a) variable-rate ceiling
| Loan amount | SBA maximum (variable) | At a 7.00% prime rate |
|---|---|---|
| Up to $50,000 | Base rate plus 6.5% | 13.5% |
| $50,001-$250,000 | Base rate plus 6.0% | 13.0% |
| $250,001-$350,000 | Base rate plus 4.5% | 11.5% |
| More than $350,000 | Base rate plus 3.0% | 10.0% |
Base rate is the prime rate or SBA's optional peg rate. The last column uses the 7.00% bank prime loan rate in the Federal Reserve H.15 release dated October 16, 2026 (daily values through October 14, 2026). These are ceilings, not quotes; lenders can charge less. SBA publishes fixed-rate maximums separately, so they are not shown here. Source: SBA lender terms and Federal Reserve H.15, both checked October 16, 2026.
What sets your rate
- Loan type (term loan, line of credit, equipment financing, SBA loan)
- Lender type (bank, credit union, SBA lender, online lender)
- Your personal and business credit
- Cash flow and time in business
- Collateral and any personal guarantee
- Term length
- Fixed or variable pricing
Many loans start from the prime rate. As the Federal Reserve puts it, "Prime is one of several base rates used by banks to price short-term business loans." When prime moves, variable rates tied to it move too.
The SBA ceiling is your yardstick
SBA says 7(a) rates are negotiated between the borrower and the lender but are subject to SBA maximums, which are pegged to the prime rate or an optional peg rate. Smaller loans are allowed a bigger spread, which is why the $50,000-or-less tier has the highest cap. If an offer for a similar loan size sits well above that ceiling, you have a reason to ask why. See SBA 7(a) interest rate caps for detail, the SBA 7(a) program page, and how to qualify for an SBA loan.
SBA microloans have their own caps. Per SBA, the maximum is the rate charged on the SBA loan to the intermediary plus 7.75% for loans over $10,000, or plus 8.5% for loans of $10,000 or less. Read the SBA microloan page and how to get an SBA microloan.
Rate vs APR vs total cost
The interest rate is the cost of borrowing the money. APR adds fees, so it is the better number for comparing offers. The CFPB explains the difference. Then do the step most owners skip: write down the total dollars you will repay and the payment schedule (monthly, weekly or daily). Our cost of capital calculator helps you line offers up side by side.
Why a factor rate is not an interest rate
A merchant cash advance quotes a factor rate. It buys a share of your future sales and is repaid through daily or weekly debits; it is not a loan, and the factor rate is a flat multiple, not an annual rate. Here is an example, not a quote: a $50,000 advance at a 1.35 factor rate means you repay $67,500. That $17,500 cost is fixed no matter how fast you repay, so the shorter the payback, the higher the true yearly cost. Turn any offer into total dollars and payment schedule before you compare it with a loan.
Weighing one? Read merchant cash advance alternatives and is a merchant cash advance a good idea. Already in one? See how to refinance a merchant cash advance.
How to tell if your offer is fair, step by step
- Get it in writing: APR, fees, term, total repaid and payment schedule.
- Compare it with the SBA ceiling for that loan size in the table above.
- Get two or three offers, starting with your own bank or credit union, then SBA Lender Match.
- Ask what would lower the rate: collateral, a shorter term or a co-borrower.
- Never sign anything you have not read in full.
Example (made-up business): Maple Hollow Bakery, a fictional shop, gets a written offer for a $40,000 variable-rate loan. Because $40,000 falls in the $50,000-or-less tier, the owner checks it against the 13.5% ceiling shown above, then asks her credit union for a second quote. More on this: business funding without a broker and how to get a small business loan.
How to get a lower rate
- Pull your credit reports at AnnualCreditReport.com and fix errors.
- Clean up your bank statements and pay down revolving balances.
- Apply before you are desperate; speed usually costs more. See fastest business funding.
- Use a business line of credit for recurring needs, or equipment financing where the gear is the collateral.
If your credit is weak
Rates go up and options narrow, but that does not mean taking the first cold call. Start with bad credit business loans, look at microloans and secured options, and learn how to stop MCA broker calls.
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Sources
SBA rate caps checked on SBA.gov and prime rate checked on the Federal Reserve H.15 release on October 16, 2026.