{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-determine-the","api_url":"https://dealroom.so/api/public/questions/how-does-the-sba-determine-the","question":"How does the SBA determine the","topic":"Franchise eligibility","audience":"lender","bot_mode":"lender","short_answer":"The SBA determines the","rule":"SOP 50 10 requires all franchise agreements to be reviewed for eligibility, even if listed in the directory. A franchise relationship that grants the franchisor too much control over the franchisee's daily operations, management, or financial decisions may cause the franchise to be deemed ineligible, as it undermines the small business's independence.","example":"A lender reviews a franchise agreement for a restaurant concept. The agreement dictates specific vendors, menu items, and pricing, giving minimal autonomy to the franchisee. This level of control could raise eligibility concerns for the SBA.","what_lenders_check":"Lenders must be vigilant in reviewing franchise agreements, even those on the directory, for any overly restrictive clauses that would compromise the franchisee's independence. Such clauses can lead to a guaranty denial.","required_facts":["Franchise agreement","Franchisee independence","Operational control","Financial control","Management control","SBA Directory"],"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":"Franchise eligibility requirements","url":"https://dealroom.so/glossary/franchise-eligibility-requirements"},{"term":"Franchise Eligibility Review","url":"https://dealroom.so/glossary/franchise-eligibility-review"},{"term":"SBA Franchise Team","url":"https://dealroom.so/glossary/sba-franchise-team"},{"term":"SBA Franchise Directory","url":"https://dealroom.so/glossary/sba-franchise-directory"},{"term":"SBA's Franchise Directory","url":"https://dealroom.so/glossary/sba-s-franchise-directory"},{"term":"Eligibility","url":"https://dealroom.so/glossary/eligibility"}],"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-the-sba-determine-the","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."]}