"Prime plus 4.5, variable. That's the most SBA allows, so you know it's legit." Mira (a made-up founder) almost signed right there. She runs Kettlewhisk Roasters (a made-up roastery) and needs $340,000 for a second roaster and working capital. The rate was legal. It was also the highest rate SBA allows on a loan her size, and it was about to cost her roughly $40,000.
This is general information, not legal or financial advice. Confirm every rule against the current SOP and your lender before you sign anything.
The one tip
SBA doesn't set your rate. It sets a ceiling, and the ceiling depends on how much you borrow. Find your bracket, then make every lender quote you in the same format: base rate plus spread. If a quote sits at the ceiling, that's your cue to shop.
Under 13 CFR 120.214 and SBA SOP 50 10 8.1, Appendix 18 (effective October 1, 2026), the maximum variable rate is:
- $50,000 Or less: base rate plus 6.5%
- $50,001 To $250,000: base rate plus 6%
- $250,001 To $350,000: base rate plus 4.5%
- $350,001 And up: base rate plus 3%
The base rate is the Prime rate or the SBA Optional Peg rate. Lenders can also use SOFR or the 5-year or 10-year Treasury rate, but the total still can't go above Prime plus the same spread. So a $340,000 loan can be priced 1.5 points higher than a $360,000 loan. That's the cap, not the price. Lenders can price below it, so ask.
Fixed rates have their own maximums, which SBA publishes on its FTA wiki. A fixed maximum only applies if the rate never resets. A loan that's "fixed for 5 years" and then floats gets the variable caps.
Worked example
Here's Mira's deal with made-up but real-sized numbers. Assume Prime is 7.00% (an assumption for the math, not today's rate). The loan is $340,000 over 10 years.
- Lender A: Prime plus 4.5%, so 11.5%. Payment is about $4,780 a month, or $57,363 a year.
- Lender B: Prime plus 2.75%, so 9.75%. Payment is about $4,446 a month, or $53,354 a year.
That's about $334 a month, or roughly $40,000 over 10 years if Prime never moves.
Now the part that kills deals. Her loan is a 7(a) Small loan (up to $350,000), so SBA wants debt service coverage of at least 1.10 for her purpose. Kettlewhisk's cash flow (EBITDA) is $66,000, and it has no other debt. At Lender A's 11.5%, her coverage is 1.15. If Prime were 1 point higher, 12.5%, the payment hits about $59,721 a year and coverage drops to 1.105. That's one bad quarter from a decline. At Lender B's 9.75%, coverage is 1.24. (Some lenders also stress-test at a higher rate. That's a lender overlay, not an SBA rule.)
Mira took Lender B. She didn't borrow more to reach the lower bracket, because a lower ceiling doesn't mean a lower rate.
Do this week
Find your bracket from the list above, using the total loan amount you're asking for.
Ask every lender for its quote in writing as base rate plus spread, and whether it's fixed or variable. If it's variable, ask how often it adjusts.
Compare each spread to your cap. A quote sitting at the max is a signal to ask at least two more SBA lenders.
Run your debt service coverage (yearly cash flow divided by yearly payments on all business debt) at the quoted rate and at 1 point higher.
If you hear "fixed for 5 years," ask what base rate and spread kick in after that, and get it in writing.
Read the note before closing. SBA doesn't allow default interest rates or balloon payments, and a late fee can't be more than 5% of the regular payment, and only once you're more than 10 days late. If you're asked to sign a separate consent to a rate change you didn't request, stop and ask why.
Sources: SBA SOP 50 10 8.1, Appendix 18 (7(a) Interest Rate Requirements) and Section B, Ch. 1 (7(a) Small loan debt service coverage), download from https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs ; SBA 7(a) terms, conditions and eligibility, https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility ; 13 CFR 120.213 and 120.214 (interest rates), https://www.ecfr.gov/current/title-13/section-120.214 ; 13 CFR 120.221 (fees lenders may charge, including late fees), https://www.ecfr.gov/current/title-13/section-120.221
Verified against SOP 50 10 8.1 text and the SBA.gov 7(a) terms page: October 14, 2026.