A base rate banks post for pricing short-term business loans. The Federal Reserve reports it as the rate posted by a majority of the 25 largest U.S. commercial banks.
Prime is a rate each bank posts for itself. The Federal Reserve’s H.15 release reports the bank prime loan rate as the rate posted by a majority of the 25 largest U.S.-chartered commercial banks by domestic assets, and calls it one of several base rates banks use to price short-term business loans.
Loans are quoted as prime plus a spread, so the borrower’s rate moves whenever prime does. Short-term business credit such as a line of credit is the classic case, and banks and credit unions also use prime on term and construction loans. A note may point to the lender’s own base rate in place of a published one, so read which rate it names.
SBA builds 7(a) pricing on it. Under SBA’s rule the base rate for a variable rate 7(a) loan is prime or SBA’s optional peg rate, taken as the prime rate in effect on the first business day of the month as printed in a national financial newspaper. The maximum rate is that base plus a spread set by loan size, 3.0 percentage points for loans above $350,000.
How it shows up in the data here
Not a field here, and this site does not print a current level for any index. The Federal Reserve reports the bank prime loan rate in its H.15 release. For what borrowers were actually charged, loan comps prints the median reported rate by lender on loans made, and you can test a prime-based SBA quote in the SBA 7(a) payment calculator.
Go further
- SBA 7(a) payment calculator: Monthly payment on a 7(a) loan from terms you enter.
- Loan comps: Who made loans like yours, with the median reported rate and term.
- SBA 7(a) payment calculator: Monthly payment with the FY2027 upfront guaranty fee, with the fee paid in cash or added to the loan.
- SBA 7(a) or 504: which fits your loan: Both are SBA loans, and they work differently. The choice usually turns on what you are buying and how much cash you can put in.
- Business line of credit package checklist: A line of credit pays for the gap between spending money and collecting it. The lender wants to see that the gap is real, that it closes, and what it can take as collateral while it is open.
Related terms
- Spread (margin over an index): The fixed number of percentage points a lender adds to an index, such as prime or SOFR, to set a loan's interest rate.
- SOFR (Secured Overnight Financing Rate): A daily benchmark interest rate, published by the Federal Reserve Bank of New York, that measures the cost of borrowing cash overnight against Treasury securities.
- Adjustable rate loan: A loan whose interest rate resets on a schedule to an index, such as prime or SOFR, plus a fixed spread, so the payment can rise or fall over the term.
- Rate floor: The minimum interest rate a variable rate loan can charge. When the index plus the spread falls below the floor, the borrower pays the floor.
- Line of credit: A commitment from a lender to advance money up to a set limit, which a business can draw, repay and draw again as its cash needs rise and fall.
- SBA 7(a) loan: SBA's main business loan program. A lender makes the loan and SBA guarantees part of it: up to 85 percent of $150,000 or less and 75 percent of more, on loans up to $5,000,000.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.