Glossary · The loan itself
Default rate
In short
This is a higher interest rate that a lender can impose on a loan once it enters default, as specified in the loan agreement. It's a penalty for failing to meet repayment obligations.
What it means in a deal
Your SBA loan agreement will specify a "default rate" that kicks in if your loan goes into "loan default." This rate is significantly higher than your standard "all-in rate" and compensates the lender for increased risk and collection costs. Avoiding default is key to not incurring this extra expense.
Official sources
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Default rate
- What alternative base rates are available for variable-rate 7(a) loans besides the Wall Street Journal Prime rate?
- What is the 'Prime Rate' when talking about SBA 7(a) loan rates?
- What specific alternative base rates are permissible for variable rate 7(a) loans?
- What happens if I default on an SBA 7(a) loan?
- How does a lender request an SBA guaranty purchase after loan default?
- What is the Wall Street Journal Prime Rate's role in SBA 7(a) loan interest rates?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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