The Fed cut rates by 175 basis points, but fixed-rate loan costs went up. That is not a contradiction. It is the result of two different rate systems: variable loans tied to the Prime Rate and fixed-rate loans tied to Treasury yields. And those benchmarks have moved in opposite directions. "Rates are down" is true for variable-rate borrowers, but misleading for anyone shopping for fixed-rate financing.
Rate Snapshot (March 21, 2026)
- Prime Rate: 6.75% (down 175 bps since Sep 2024)
- 10-Year Treasury: 4.25% (up 53 bps since Sep 2024)
- Fed Funds Target: 3.50-3.75%
- Key Insight: Variable rates fell 175 bps. Fixed rates rose 38-53 bps. Same rate cycle, opposite outcomes.
Two Benchmarks, Two Directions
The disconnect comes from the benchmarks. Variable-rate commercial loans, including most SBA 7(a) loans and business lines of credit, are priced off the Prime Rate, which moves directly with the federal funds rate. Fixed-rate products, including SBA 504 loans, conventional term loans, and equipment financing, are priced off Treasury yields that the Fed does not directly control.
| Benchmark | Rate Type | Sep 2024 | Mar 2026 | Change |
|---|---|---|---|---|
| Prime Rate | Variable | 8.50% | 6.75% | -175 bps |
| 5-Year Treasury | Fixed | 3.50% | 3.88% | +38 bps |
| 10-Year Treasury | Fixed | 3.72% | 4.25% | +53 bps |
The Fed controls short-term rates. The market controls long-term rates, and they are not moving in the same direction.
The Divergence in Context
Why They Diverge
The Fed directly controls short-term rates. Prime and SOFR follow mechanically. When the FOMC cuts the federal funds target, Prime falls by the same amount, usually within days.
Treasury yields reflect market expectations: future inflation, economic growth, government borrowing, and the term premium investors demand for locking up capital. The Fed influences these factors, but it does not control them. When the FOMC began cutting in September 2024, inflation expectations remained elevated and Treasury issuance stayed high. Investors demanded higher yields on longer maturities, pushing fixed-rate benchmarks higher even as short-term rates fell.
This pattern is not unusual. The Fed controls the front end of the yield curve. The market controls the rest.
What This Means for Loan Pricing
This creates two completely different pricing environments depending on loan structure. Variable-rate products, including most SBA 7(a) loans and business lines of credit, adjust automatically with the Prime Rate. Borrowers in these products received the full benefit of rate cuts without refinancing.
Fixed-rate products tell the opposite story. SBA 504 loans, conventional term loans, and equipment financing are priced off Treasury yields plus a lender spread. As those yields rose 38 to 53 basis points, fixed borrowing costs held steady or increased. A borrower reading that "rates are down" and then shopping for a fixed-rate term loan would find little evidence of that claim in actual offers.
Estimated Current Loan Rate Ranges
These ranges reflect current market conditions and vary significantly by borrower profile and lender.
| Product | Rate Type | Benchmark | Typical Range |
|---|---|---|---|
| SBA 7(a) Variable | Variable | Prime Rate | 8.25% - 9.75% |
| Conventional Term Loan (Fixed) | Fixed | 5Y/10Y Treasury | 6.50% - 9.00% |
| Business Line of Credit | Variable | Prime Rate | 7.75% - 10.75% |
| Equipment Financing (Fixed) | Fixed | 5Y/10Y Treasury | 6.00% - 9.00% |
| SBA 504 (Fixed) | Fixed | 5Y/10Y Treasury | 5.50% - 7.00% |
Borrower Implications
Whether rates are "up" or "down" depends entirely on the type of loan you have or are considering.
If Your Company Has an Existing Variable-Rate Loan
Your borrowing costs have already declined. A variable-rate SBA 7(a) loan that carried a spread of Prime + 2.75% was priced at 11.25% in August 2024 (8.50% + 2.75%). That same loan is now priced at 9.50% (6.75% + 2.75%). On a $500,000 loan with a 10-year amortization, that 175-basis-point reduction translates to approximately $500 per month in lower debt service. This happened automatically at each rate reset without any action from the borrower.
If Your Business Is Shopping for a Fixed-Rate Loan
The headline "rate cuts" have not reduced your cost of borrowing. Fixed-rate commercial term loan rates are driven by Treasury yields, which have moved in the opposite direction of the federal funds rate. The spread your lender quotes above the Treasury benchmark matters, but so does the benchmark itself, and that benchmark has not cooperated with the narrative.
Timing Strategy
Waiting for rates to fall only works if you are betting on the right benchmark. Some borrowers are delaying fixed-rate commitments in hopes that Treasury yields will eventually follow the Fed lower. Treasury yields could decline if inflation expectations moderate, fiscal deficits narrow, or economic growth slows. They could also rise further. Businesses with an immediate capital need should evaluate whether current fixed-rate terms satisfy the project's return requirements rather than waiting for a rate environment that may not materialize.
What to Watch
The indicators that matter depend on the loan structure. The FOMC meets next on May 6-7; the statement and updated dot plot will signal whether additional cuts are likely, which matters for variable-rate borrowers. For fixed-rate borrowers, the more important indicators are monthly CPI and PCE inflation readings and Treasury auction results, which reveal real-time investor demand for longer-duration government debt. For a deeper look at the mechanism connecting the federal funds rate to the Prime Rate, see our analysis: How Is the Prime Rate Determined?
Compare financing structures and find the right fit for your business at our financing hub.