Interest rate resetting periodically to a benchmark plus a fixed spread, typically r = max(SOFR, Floor) + Spread. The SOFR floor (commonly 0.75%–1.00%) is an interest-rate option held by the lender, worth 10–30 bps in present-value terms in normal rate regimes. Floating-rate structure gives middle-market direct loans an effective duration of sim 0.1–0.25 years vs. sim 4 years for fixed-rate high-yield bonds — the central reason direct lending outperformed in 2022–2023.