The Federal Reserve does not set the rate on your business loan, but it sets the rate almost everything else is built on. When that base moves, variable-rate payments move with it, new fixed-rate offers reprice, and the amount a lender will approve for the same income changes. This guide shows where rates stand as of November 2026 and works through what they mean for a real borrower.
Where rates stand in November 2026
| Benchmark | Level | As of | Source |
|---|---|---|---|
| Federal funds target range | 3.75% to 4.00% | October 28, 2026 | FOMC statement |
| Effective federal funds rate | 3.88% | November 5, 2026 | Federal Reserve H.15 |
| Bank prime loan rate | 7.00% | November 5, 2026 | Federal Reserve H.15 |
| WSJ prime rate | 7.00% | November 3, 2026 | Bankrate's WSJ prime rate table |
| SOFR | 3.92% | November 5, 2026 | Federal Reserve Bank of New York, via FRED |
| 5-year Treasury yield | 4.59% | November 5, 2026 | Federal Reserve H.15 |
| 10-year Treasury yield | 4.84% | November 5, 2026 | Federal Reserve H.15 |
At its October 28, 2026 meeting, the Federal Open Market Committee kept the target range at 3.75% to 4.00%. The vote was 10 to 2, and both dissenters preferred a quarter-point increase. The statement said inflation remains elevated. That combination matters to borrowers: the debate at the Fed is between holding and raising, so plan your borrowing on the assumption that rates may not fall soon.
How the Fed's rate reaches your loan payment
The Fed sets a target for overnight bank borrowing. It does not set your loan rate or even the prime rate.
Banks set prime. The Federal Reserve's FAQ on the prime rate explains that each bank determines its own prime rate, and that many banks set it based partly on the federal funds target. The H.15 release describes prime as the rate posted by a majority of the 25 largest U.S. banks and as one of several base rates used to price short-term business loans. Right now prime sits 3 points above the top of the fed funds target range.
Your lender adds a spread. A variable business loan is typically priced as a base rate, such as prime or SOFR, plus a margin that reflects your risk. When the base rises a quarter point, your rate rises a quarter point at the next adjustment.
Fixed rates follow longer-term yields. A fixed-rate loan is priced off where the lender expects rates to be over the life of the loan, which is why Treasury yields matter. With the 10-year yield at 4.84% on November 5, 2026, well above the 3.88% effective fed funds rate, long fixed-rate money is more expensive than overnight money.
SBA 7(a) loans: the caps and the new base rates
SBA 7(a) loans have a ceiling on what lenders can charge. The limit is set by SBA regulation, not by Congress. Under 13 CFR 120.214, a variable 7(a) rate cannot exceed the base rate plus:
| Loan amount | Maximum spread | Maximum rate with prime at 7.00% (November 2026) |
|---|---|---|
| $50,000 or less | 6.5 points | 13.50% |
| $50,001 to $250,000 | 6.0 points | 13.00% |
| $250,001 to $350,000 | 4.5 points | 11.50% |
| More than $350,000 | 3.0 points | 10.00% |
The SBA's 7(a) loans page lists the same tiers for its 7(a) Working Capital Pilot and puts the maximum 7(a) loan at $5 million. These are ceilings; a strong borrower can negotiate below them.
Since March 1, 2026, lenders have more choice of base rate. An SBA notice in the Federal Register on February 10, 2026 added three alternative base rates for variable 7(a) loans: the 5-year Treasury rate, the 10-year Treasury rate and SOFR. Prime and the SBA Optional Peg Rate remain available. Whatever base the lender uses, the rate still cannot exceed prime plus the allowed spread for that loan size. If a lender offers you a SOFR-based or Treasury-based 7(a) loan, ask how the rate will reset and compare the starting rate against the prime-based cap.
Our guide to SBA loans covers the rest of the program.
How higher rates shrink what you can borrow
This is the effect most owners miss. Lenders size loans by asking whether your cash flow covers the payments, usually through the debt service coverage ratio (DSCR): net operating income divided by annual debt payments. When rates rise, the same income supports smaller payments on a smaller loan.
Monthly payment on a 5-year fully amortizing loan:
| Loan amount | At 7% | At 9% | At 11% | Extra per year, 7% vs 11% |
|---|---|---|---|---|
| $100,000 | $1,980 | $2,076 | $2,174 | $2,329 |
| $250,000 | $4,950 | $5,190 | $5,436 | $5,824 |
| $500,000 | $9,901 | $10,379 | $10,871 | $11,647 |
| $1,000,000 | $19,801 | $20,758 | $21,742 | $23,295 |
Worked example. A business earns $150,000 a year in net operating income and applies to a lender that requires a DSCR of at least 1.25. The most it can spend on debt payments is $150,000 / 1.25 = $120,000 a year, or $10,000 a month. On a 5-year loan:
- At 7%, $10,000 a month repays about $505,000.
- At 11%, the same $10,000 a month repays only about $460,000.
Nothing about the business changed, yet the loan it can get fell by about $45,000. Run your own numbers with our DSCR guide and business loan calculator at two or three rate levels before you set a project budget.
How much does one point cost? On a $250,000 loan over 5 years, moving from 7% to 8% raises the payment from $4,950.30 to $5,069.10 a month. That is $118.80 a month, about $1,426 a year and about $7,128 over the life of the loan.
Banks are tightening for small firms
The Federal Reserve Board's October 2026 Senior Loan Officer Opinion Survey, published November 2, 2026 and covering the third quarter, found:
- Banks tightened standards on commercial and industrial loans to small firms (annual sales under $50 million), while standards for large and middle-market firms were basically unchanged.
- Banks tightened collateral requirements and interest rate floors for small firms.
- Demand for these loans weakened, on net, for firms of all sizes.
The rate floor point deserves attention. A floor sets the lowest rate your variable loan can reach. If prime later falls, a loan with a high floor may not fall with it, so read the floor before you sign a variable-rate loan.
Online lenders: faster, pricier and full of surprises
Non-bank lenders price for risk and speed, and their headline numbers are not always the numbers borrowers end up paying.
In the Federal Reserve Banks' 2026 Report on Employer Firms, based on a 2025 survey of 6,525 employer firms:
- The share of applicants seeking online lenders rose from 17% in the 2020 survey to 29% in 2025.
- 60% of online lender borrowers said actual costs were higher than expected, compared with 37% at small banks and 32% at large banks.
- Among approved applicants, 35% were satisfied with online lenders, compared with 65% at small banks and 76% at credit unions.
For a sense of pricing, OnDeck reports an average APR of 53.2% on term loans and 59.8% on lines of credit originated in the half-year ending June 30, 2026, while Bluevine advertises line of credit rates as low as 7.8% for its top-qualifying customers.
Factor rates and APR
Many short-term products quote a factor rate instead of an APR. A 1.2 factor sounds like 20%, but it is not. On a $100,000 advance at a 1.2 factor, you repay $120,000. Assuming equal payments every business day (21 a month, 252 a year) over six months, that is 126 payments of $952.38, and the APR works out to about 75%. Stretch the same 1.2 factor over 12 months and it falls to about 38% APR.
A 1.3 factor repaid daily over 12 months works out to about 55% APR on the same assumptions. The pattern holds every time: the shorter the term, the higher the APR for the same fee. Our MCA vs term loan guide shows how to calculate it yourself.
Fixed or variable?
Variable rates track the base rate in both directions. They fit short-term needs and borrowers who can absorb higher payments if rates rise. Check for a floor, as noted above, and ask how often the rate resets.
Fixed rates lock in today's cost. They fit long-lived investments such as equipment or real estate, where predictable payments help with budgeting. With the 5-year Treasury at 4.59% and the 10-year at 4.84% on November 5, 2026, fixed-rate offers reflect those longer-term yields rather than the overnight rate.
Splitting the difference is common: a variable line of credit for working capital and a fixed term loan for long-term assets.
Five ways to lower your borrowing cost
- Strengthen your file before you apply. Pay down revolving balances, fix reporting errors and avoid new credit applications in the months before a loan request. Lenders price your risk at the time of underwriting.
- Offer collateral. Secured loans reduce the lender's risk, which usually shows up in the rate.
- Compare across lender types. The gap between bank and online pricing is far larger than a single Fed move. On a $100,000 loan, every 10 points of APR is roughly $10,000 a year in interest at the start of the loan.
- Negotiate the spread, not the base. You cannot change prime or SOFR, but the margin is negotiable. Half a point off the spread on a $500,000 loan saves about $2,500 in interest in the first year, less as the balance falls.
- Watch prepayment terms. If you may refinance later, know the cost of paying early. For SBA 7(a) loans with maturities of 15 years or more, 13 CFR 120.223 imposes a fee when prepayments in any of the first three years total more than 25% of the loan's highest outstanding balance in that year: 5% of the prepaid amount in year one, 3% in year two and 1% in year three.
If you want to see what rates you might be offered before you commit to a plan, you can see what you qualify for on Loanistry.
Should you wait for lower rates?
Nobody can tell you when rates will fall, and the Fed's own October statement leaned toward caution on inflation, with two members wanting a hike. A practical approach:
- Borrow when the investment pays at today's rate. If a project only works if rates fall, it is a bet on the Fed, not a business case.
- Prefer flexibility if you borrow variable. No floor, or a low one, and modest prepayment terms let you benefit if rates do fall.
- Size the loan to the DSCR at a higher rate. Testing your payment at two points above today's rate shows whether a rise would strain you.
When you are ready to compare real offers across banks, SBA lenders and online lenders, check your options with Loanistry.
Sources
- Federal Reserve Board: FOMC statement, October 28, 2026, checked November 2026
- Federal Reserve Board: H.15 Selected Interest Rates (Daily), checked November 2026
- Federal Reserve Board: What is the prime rate, and does the Federal Reserve set the prime rate?, checked November 2026
- Bankrate: Wall Street Journal prime rate, checked November 2026
- FRED: Secured Overnight Financing Rate (source: Federal Reserve Bank of New York), checked November 2026
- Legal Information Institute: 13 CFR 120.214, conditions for variable interest rates, checked November 2026
- U.S. Small Business Administration: 7(a) loans, checked November 2026
- Federal Register: 7(a) Alternative Base Rate Options, February 10, 2026, checked November 2026
- CustomsMobile: 13 CFR 120.223, subsidy recoupment fee on prepayment, checked November 2026
- Federal Reserve Board: Senior Loan Officer Opinion Survey, October 2026, checked November 2026
- Federal Reserve Banks: 2026 Report on Employer Firms, checked November 2026
- OnDeck: Term Loans for Business, checked November 2026
- Bluevine: Business Line of Credit, checked November 2026