{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-the-sba-compliant-status-of-a-franchise-agreement-not-on-the-dire","api_url":"https://dealroom.so/api/public/questions/how-does-a-lender-verify-the-sba-compliant-status-of-a-franchise-agreement-not-on-the-dire","question":"How does a lender verify the 'SBA-compliant' status of a franchise agreement not on the directory?","topic":"Franchise eligibility","audience":"lender","bot_mode":"lender","short_answer":"The lender must submit the complete franchise agreement, the Franchise Disclosure Document (FDD), and any other related addenda to the SBA for a direct review. The SBA will then issue a determination on whether the agreement meets its eligibility requirements.","rule":"SBA-compliant franchise agreements must allow the franchisee sufficient independence in business operations and financial management. When a franchise isn't on the directory, the lender acts as the initial reviewer, then submits the full package to the SBA's Office of Franchise and Business Opportunity (OFBO) for a formal determination. This review ensures no restrictive clauses compromise the franchisee's control or create an ineligible affiliation.","example":"A lender receives an application for a new 'Tech Repair Hub' franchise. The system is unlisted. The lender reviews the franchise agreement and FDD for common problematic clauses (e.g., franchisor requiring collateral on SBA loan, excessive control over pricing). Satisfied, the lender compiles all documents and submits them to the SBA for an official franchise eligibility opinion.","what_lenders_check":"Ensuring the franchise agreement is truly SBA-compliant is paramount. The lender must identify any potential issues that could lead to an ineligible business before SBA review, as an adverse determination could stop the loan process and result in wasted effort.","required_facts":["Franchise agreement","FDD","SBA OFBO review","Franchisee independence","Compliance determination"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"What are the specific criteria for a new franchise model to be included on the SBA Franchise Directory?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-criteria-for-a-new-franchise-model-to-be-included-on-the-sba-franchi"},{"question":"How does a lender determine if a franchise agreement contains impermissible control provisions not listed on the Directory?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-determine-if-a-franchise-agreement-contains-impermissible-control-provis"},{"question":"What are the specific requirements for a lender to obtain an approved franchise agreement for a 7(a) loan when the franchise is not listed on the SBA Franchise Directory?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-a-lender-to-obtain-an-approved-franchise-agreement-"},{"question":"Which specific provisions in a franchise agreement raise red flags for undue franchisor control, making it ineligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/which-specific-provisions-in-a-franchise-agreement-raise-red-flags-for-undue-franchisor-co"},{"question":"Can an existing franchise location that is not currently listed on the SBA Franchise Directory be eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-an-existing-franchise-location-that-is-not-currently-listed-on-the-sba-franchise-direc"},{"question":"How does the SBA determine if a franchise agreement grants the franchisor 'undue control' over the franchisee, impacting 7(a) eligibility?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-determine-if-a-franchise-agreement-grants-the-franchisor-undue-control-ov"}],"related_terms":[{"term":"SBA Lender status","url":"https://dealroom.so/glossary/sba-lender-status"},{"term":"Claim on the SBA Guarantee","url":"https://dealroom.so/glossary/claim-on-the-sba-guarantee"},{"term":"Franchise agreement","url":"https://dealroom.so/glossary/franchise-agreement"},{"term":"Preferred Lender Status","url":"https://dealroom.so/glossary/preferred-lender-status"},{"term":"SBA lender","url":"https://dealroom.so/glossary/sba-lender"},{"term":"Call on the guaranty","url":"https://dealroom.so/glossary/call-on-the-guaranty"}],"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-verify-the-sba-compliant-status-of-a-franchise-agreement-not-on-the-dire","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."]}