{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-determine-affiliation-for-size-purposes-when-evaluating-common-economic-","api_url":"https://dealroom.so/api/public/questions/how-does-a-lender-determine-affiliation-for-size-purposes-when-evaluating-common-economic-","question":"How does a lender determine affiliation for size purposes when evaluating common economic dependence?","topic":"Affiliation & size","audience":"lender","bot_mode":"lender","short_answer":"A lender assesses common economic dependence by examining whether a business relies on another for a substantial portion of its revenues or expenditures, even without common ownership or management.","rule":"Affiliation based on economic dependence occurs when one business derives 85% or more of its revenue from another business, or when it depends on another business for a substantial amount of outsourcing or subcontracts, making it economically dependent. This rule prevents larger entities from gaining eligibility through shell companies or highly reliant subcontractors.","example":"A borrower applies for a 7(a) loan for a new distribution company. During underwriting, the lender discovers that 90% of the distribution company's projected revenue will come from a single, larger manufacturing company. The lender must determine if these two companies are affiliated due to economic dependence, potentially making the distribution company ineligible based on the manufacturer's size.","what_lenders_check":"Lenders must scrutinize relationships between entities, especially if one company appears to be a captive supplier or customer of another. Failure to identify affiliation can lead to an ineligible borrower and a non-guaranteed loan.","required_facts":["Revenue concentration","Shared expenses","Outsourcing reliance","Economic dependence threshold"],"source_families":["13 CFR Part 121 - Small Business Size Regulations","Affiliation and Lending Criteria for SBA Business Loan Programs - Final Rule"],"official_sources":[{"title":"13 CFR Part 121 - Small Business Size Regulations","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-121"},{"title":"Affiliation and Lending Criteria for SBA Business Loan Programs - Final Rule","url":"https://www.federalregister.gov/documents/2023/04/10/2023-07173/affiliation-and-lending-criteria-for-the-sba-business-loan-programs"}],"related_questions":[{"question":"When does a contractual relationship between two businesses trigger affiliation for size standard calculations?","url":"https://dealroom.so/for-lenders/questions/when-does-a-contractual-relationship-between-two-businesses-trigger-affiliation-for-size-s"},{"question":"How does ownership of options or warrants affect affiliation determination for SBA size standards?","url":"https://dealroom.so/for-lenders/questions/how-does-ownership-of-options-or-warrants-affect-affiliation-determination-for-sba-size-st"},{"question":"What are the size standard requirements for a business applying for a 7(a) loan if it operates internationally?","url":"https://dealroom.so/for-lenders/questions/what-are-the-size-standard-requirements-for-a-business-applying-for-a-7-a-loan-if-it-opera"},{"question":"What specific scenarios involving shared directors, officers, or key employees constitute 'common management' triggering affiliation for SBA size determination?","url":"https://dealroom.so/for-lenders/questions/what-specific-scenarios-involving-shared-directors-officers-or-key-employees-constitute-co"},{"question":"Under what conditions does a shared economic interest trigger affiliation for SBA size standard purposes?","url":"https://dealroom.so/for-lenders/questions/under-what-conditions-does-a-shared-economic-interest-trigger-affiliation-for-sba-size-sta"},{"question":"How does the 'totality of the circumstances' rule apply when determining affiliation for SBA size standards?","url":"https://dealroom.so/for-lenders/questions/how-does-the-totality-of-the-circumstances-rule-apply-when-determining-affiliation-for-sba"}],"related_terms":[{"term":"Economic Dependence","url":"https://dealroom.so/glossary/economic-dependence"},{"term":"Financial dependence","url":"https://dealroom.so/glossary/financial-dependence"},{"term":"Affiliation","url":"https://dealroom.so/glossary/affiliation"},{"term":"Common officer","url":"https://dealroom.so/glossary/common-officer"},{"term":"Common Ownership","url":"https://dealroom.so/glossary/common-ownership"},{"term":"Common Control","url":"https://dealroom.so/glossary/common-control"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-determine-affiliation-for-size-purposes-when-evaluating-common-economic-","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}