The Fed Raised Rates in September. Here's What It Does to Your Small Business Loan Options

What the Fed actually did

On September 16, 2026, the Federal Open Market Committee voted unanimously — 12 to 0 — to raise the federal funds target range by a quarter point to 3.75%–4.00%. It was the first rate increase since July 2023, and it caught a market that had spent the summer pricing in cuts completely off guard. The Fed's own dot plot now shows the median policymaker expecting the funds rate around 4.1% at the end of 2026 and at the end of 2027 — a full reversal of the easing story.

The transmission was immediate. JPMorgan, Bank of America, Citi, Wells Fargo, and the rest of the big prime-setting banks raised their prime rates from 6.75% to 7.00% effective September 17. Prime is the benchmark behind most variable-rate small business lending in America, so that single move repriced an enormous amount of outstanding and future business debt within days.

Which business funding products get more expensive

Not everything moves at once. The dividing line is whether the product's rate is tied to a floating benchmark:

Product	Tied to prime?	What the hike does
Variable-rate SBA 7(a) loans	Usually yes	Rate and payment adjust at the next reset — often within a billing cycle or two.
Business lines of credit	Almost always	Rate on drawn balances rises with prime; new draws cost more immediately.
Variable-rate bank term loans	Usually	Payment steps up at the next adjustment date.
Fixed-rate SBA / bank loans	No	Your existing payment doesn't change. New fixed loans are priced off higher benchmarks, so new quotes are worse.
SBA 504 loans	No (Treasury-linked)	Already moved before the hike — September 504 rates ran 6.53%–6.60% vs. 6.19%–6.27% in August.
Merchant cash advances	No	Factor rate is set at signing and the total payback is fixed in dollars. The hike changes nothing about an existing advance — and only indirectly affects new quotes.

The pattern: if your rate can float, it just floated up. If your cost was fixed in dollars at signing, the Fed can't touch it.

The SBA math: what the hike costs you in dollars

SBA 7(a) maximum rates are set mechanically as prime plus a spread. For loans over $250,000, the cap is prime + 5% — which means the maximum allowable rate just moved from 11.75% to 12.00%. Lenders don't always charge the cap, but the ceiling moved, and variable-rate borrowers feel it directly.

A simple way to feel the scale: take a $100,000 variable-rate balance at prime + 2%. Before the hike, that's 8.75%; after, 9.00%. On a fully drawn balance, that quarter point costs roughly $250 more per year — about $21 a month per $100,000. Scale it to your actual balances and it stops being abstract fast. A business carrying $400,000 on variable facilities just picked up roughly $1,000 a year in interest for doing nothing.

And the 504 program — the workhorse for owner-occupied real estate and heavy equipment — was already moving before the Fed acted, because 504 debentures price off Treasury yields. The September prints (6.53%–6.60%) were already about a third of a point above August. Borrowers who closed in August locked the cheaper print; borrowers closing now didn't.

Why fixed-cost funding looks better in a hiking cycle

Here's the underappreciated flip side. A merchant cash advance doesn't have an interest rate that floats — it has a factor rate and a total payback in dollars, both locked at signing. A $100,000 advance at a 1.30 factor costs $130,000 in total payback whether prime is 5%, 7%, or 9%. In a stable-rate world, that fixed cost is just expensive. In a hiking world, it gains a property variable products can't offer: the number cannot go up after you sign.

To be clear-eyed about it: an MCA is still the expensive product per dollar of capital — run the real math in our true-cost guide before you sign anything. The point is not that advances got cheaper. The point is that everything with a floating rate got more expensive and less predictable, while fixed-cost funding's price is knowable to the penny on day one. When rates are moving against you, certainty has a value you can feel.

This is also why the comparison changed even though MCA pricing didn't. A variable-rate loan quoted last month and a fixed-cost advance quoted last month were priced in the same rate environment. Quote both today and the variable product carries a higher rate and an open-ended exposure to October 28; the fixed product carries the same dollars it always did. If you were on the fence between the two, the hike just tilted the fence.

Why shopping multiple funders matters more right now

Rate hikes don't just raise borrowers' costs — they raise funders' costs. Alternative lenders borrow to lend: Enova, the publicly traded parent of OnDeck, prices its own corporate credit facility at SOFR plus 3.25%, so benchmark moves hit a funder's balance sheet before they show up in anyone's offer letter. Every funder passes that through differently, on a different schedule, with different margins.

That dispersion is your opportunity. When every lender's cost of capital is moving, the spread between the best and worst offer on the same file widens — and the only way to find the best one is to get several. A single quote in a hiking cycle is a guess; four quotes are a market. That is exactly what a brokered process does: one application, multiple funders, and the pricing spread does the talking. See how the products compare before you take quotes, so you're comparing the right things.

What to do before the October 27–28 meeting

The Fed meets again October 27–28, and the dot plot gives no comfort that this hiking cycle is done. If your business needs capital in the fourth quarter, the practical moves are:

1. Don't sit on a fully drawn variable line. Every quarter point is ~$250/year per $100K drawn. If you have cheaper fixed options or cash to pay down the line, the math now favors it.
2. Get fixed-cost quotes in writing now. A factor-rate offer signed today locks its dollars through whatever the Fed does on the 28th. A variable quote doesn't.
3. If you're mid-application on an SBA loan, ask your lender exactly when your rate locks. "Prime plus" with a floating start date means the number can move between approval and closing.
4. Shop the file, don't marry the first offer. Funder costs are repricing unevenly — the best offer this week may come from a different lender than the best offer last month.
5. Know your minimums before you apply. Ten minutes on what funders actually require keeps you from burning a week on a product you were never going to get.

Frequently asked questions

Will my existing SBA loan payment change because of the rate hike?

If your 7(a) loan has a variable rate tied to prime, yes — expect an adjustment at your next reset date, typically within one or two billing cycles. Fixed-rate SBA loans are unaffected; your payment is locked for the life of the loan.

Does the Fed hike change merchant cash advance pricing?

Not directly — MCA factor rates aren't tied to prime, and the total payback on an existing advance is fixed in dollars. Indirectly, funders' own borrowing costs rose (benchmark-linked credit facilities reprice too), which can nudge new quotes over time. But nothing in an existing advance can move.

Should I wait for rates to come back down before borrowing?

The Fed's own projections argue against waiting: the median policymaker expects the funds rate around 4.1% at the end of 2026 and 2027 — no cuts priced in. If your business needs capital to capture revenue now, waiting for a rate environment that isn't forecast is an expensive bet.

How fast do business loan rates move after a Fed hike?

Prime-based products move within days — the big banks repriced to 7.00% on September 17, the day after the vote. Variable-rate borrowers typically see it at their next billing cycle. Treasury-linked products like SBA 504s can move even before the Fed acts, as September's prints showed.

Is a fixed-cost advance actually cheaper than a variable loan now?

Not necessarily — "fixed" and "cheap" aren't the same thing. MCAs remain expensive per dollar of capital; what changed is that variable products got pricier and less predictable while the advance's cost stayed knowable to the penny. Run both offers through real dollar math — our true-cost guide shows how — and compare totals, not rate labels.