Prime rate

Definition

The benchmark most variable SBA loans are priced against, plus a spread.

Why It Matters

It moves with the Federal Reserve, and the borrower's payment moves with it. That is why an acquisition loan's rate is rarely fixed for the life of the deal, and why the payment you model today can be different by the time you close. Underwrite at a rate above today's. The coverage that barely clears a lender's line at the current number is the coverage you lose first. The spread over prime is negotiable even when prime is not. Since October 2026 a lender may peg the loan to SOFR or to the five-year or ten-year Treasury rate instead, but the most it may charge is still prime plus the allowed spread.

In numbers: A loan priced at prime plus 2.5% costs 9.5% when prime sits at 7%; if prime rises half a point, so does the loan, and the monthly payment follows.