{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-evaluate-a-master-franchise-agreement-for-7-a-loan-eligibility-if-the-bor","api_url":"https://dealroom.so/api/public/questions/how-does-the-sba-evaluate-a-master-franchise-agreement-for-7-a-loan-eligibility-if-the-bor","question":"How does the SBA evaluate a master franchise agreement for 7(a) loan eligibility if the borrower is a sub-franchisor?","topic":"Franchise eligibility","audience":"lender","bot_mode":"lender","short_answer":"The SBA evaluates both the master franchise agreement and the sub-franchise agreement for eligibility, ensuring that both comply with SBA's franchise requirements and are listed on the Franchise Directory.","rule":"When a borrower is acquiring master franchise rights (to act as a sub-franchisor), or an existing sub-franchise, the SBA requires review of both the overarching master franchise agreement and the specific sub-franchise agreement. Both agreements must adhere to SBA's franchise eligibility policies, including addressing control over the franchisee, termination clauses, and proper listing on the Franchise Directory. The SBA 'looks through' to ensure no undue restrictions on the sub-franchisor or sub-franchisee.","example":"A borrower applies for a 7(a) loan to purchase master franchise rights for a region, allowing them to sell individual franchises. The lender verifies that both the original franchisor's agreement and the borrower's proposed sub-franchise agreement are compliant and listed on the SBA Franchise Directory or are submitted for review.","what_lenders_check":"Lenders must carefully review the complexity of multi-tiered franchise structures. Ensuring both levels of agreements comply with SBA rules and are properly documented on the Franchise Directory is critical to avoid eligibility issues and potential guaranty repair.","required_facts":["Master franchise agreement","Sub-franchise agreement","SBA Franchise Directory","Control provisions","Eligibility compliance"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","7(a) Loan Program Terms, Conditions, and Eligibility"],"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":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"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":"Master franchise agreement","url":"https://dealroom.so/glossary/master-franchise-agreement"},{"term":"Aggregate SBA 7(a) Loan Eligibility","url":"https://dealroom.so/glossary/aggregate-sba-7-a-loan-eligibility"},{"term":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-loan"},{"term":"Master Franchise","url":"https://dealroom.so/glossary/master-franchise"},{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"SBA 7(a) Loan Program","url":"https://dealroom.so/glossary/sba-7-a-loan-program"}],"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-evaluate-a-master-franchise-agreement-for-7-a-loan-eligibility-if-the-bor","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."]}