The base: what prime actually is
The prime rate is the reference rate major US banks publish for their most creditworthy customers, and it moves when the Federal Reserve moves its policy rate. SBA notes define which prime they reference, most use the Wall Street Journal prime, and almost all 7(a) loans float with it. As of September 17, 2026, prime is 7.00%.
The practical consequence: the rate you close with is not the rate you keep. If prime falls a point next year, your payment falls with it, all else equal. If it rises, the reverse. The note’s reset terms define how often and how that happens.
The spread: the lender’s margin, within caps
The spread is the lender’s compensation for risk and servicing, added to the base. The SBA caps the maximum spread by loan-size bracket, so a small loan can be priced with a much wider margin than a large one, and no lender may exceed the cap for your bracket. Within that ceiling, the market sets your actual spread from deal specifics: size, term, collateral, credit, and how much the desk wants the file.
What this means for you: the spread is the only part of the rate anyone can negotiate, and the caps are published rules, not folklore. When a lender says “that’s our rate,” the accurate version is “that’s our spread within the SBA’s cap, and here is where it sits.”
How a variable rate behaves after closing
The note fixes the spread and names the base. On each reset date, typically tied to how often prime is re-surveyed, the rate reprices as prime plus the same spread, and the payment adjusts. Amortization continues; the term does not stretch because the rate moved. Borrowers who model affordability at today’s prime should also model it a point higher, so a rising year is a budget line item rather than a crisis. The payment calculator makes that two minutes of work.
Why two lenders quote the same borrower differently
None of this is a scandal; it is a market. It is also the argument for three quotes on an identical package, which is the only way to see the spread you actually merit. One more practical point: ask each lender to quote the spread in writing, as prime plus a number, rather than as a rate. A bare rate hides which half of it is negotiable, and the negotiation is where the money is.
- Different cost of funds. Banks fund themselves differently; a lender with cheaper deposits can live with a tighter spread.
- Different appetite. Desks have industries, sizes and structures they want this quarter, and pricing reflects desire.
- Different delegated status and process. A desk that books hundreds of SBA loans a year prices its efficiency into the spread.
- Different read of the same file. Collateral quality, coverage and credit are judged, not computed, and judgment varies.
The fixed-rate exception
The 504 program exists partly because some buyers want rate certainty: its debenture piece carries a long fixed rate set at funding, blended with the bank’s piece which is usually fixed or fixed-ish on real estate. Standard 7(a) loans are variable, full stop. When a lender offers a “fixed” 7(a)-style product, read the structure carefully; it is worth understanding exactly what is fixed and for how long before you sign.