Also known as alternate base rate and ABR. A floating interest rate (www.practicallaw.com/9-382-3552) reference rate used by a lender in a loan agreement. In general terms, the base rate is the rate per annum equal to the greatest of:
The prime rate (the variable annual rate of interest so designated from time to time by that lender in the US as its "prime rate");
0.50% above the federal funds effective rate (www.practicallaw.com/5-382-3455); and
1.0% above the Eurodollar rate (www.practicallaw.com/4-382-3446) for a Eurodollar rate loan with a one-month interest period.
The borrower typically pays interest on a loan at a rate equal to the base rate plus an agreed applicable margin (www.practicallaw.com/6-382-3233).
For more information on base rates, see Standard Clauses, Loan Agreement: Borrowing Mechanics (www.practicallaw.com/3-383-6717).