Glossary
What is Prime Rate?
The prime rate is a benchmark interest rate that banks use as a reference for pricing many variable-rate loans. The widely quoted U.S. prime rate generally moves with the federal funds rate set by the Federal Reserve. Variable-rate business loans, including many SBA loans and lines of credit, are often priced as prime plus a margin. When the prime rate changes, payments on those loans can change as well. Check the current prime rate when evaluating variable-rate offers.
Example
A line of credit priced at prime plus 2% adjusts when the prime rate rises or falls.
Related funding
Business Line of Credit: Draw when you need it, pay for what you use.
Related terms
Questions about an offer? Your advisor will explain every term.