{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-constitutes-common-management-triggering-affiliation-for-sba-7-a-size-determination","api_url":"https://dealroom.so/api/public/questions/what-constitutes-common-management-triggering-affiliation-for-sba-7-a-size-determination","question":"What constitutes 'common management' triggering affiliation for SBA 7(a) size determination?","topic":"Affiliation & size","audience":"lender","bot_mode":"lender","short_answer":"Common management exists when an individual or entity controls the day-to-day management, policy setting, or strategic direction of two or more businesses, even without majority ownership.","rule":"The SBA's affiliation rules consider common management as a control factor. If the same individual(s) or entity directs the operations or strategy of multiple businesses, those businesses may be affiliated, regardless of ownership percentages. This prevents businesses from circumventing size standards by creating separate legal entities under the same operational control.","example":"A borrower owns 49% of Company A and 40% of Company B. While neither is a majority stake, the lender discovers the borrower serves as CEO for both companies and makes all key operational and strategic decisions. The lender determines that Company A and Company B are affiliated due to common management, requiring their revenues to be combined for size standard analysis.","what_lenders_check":"Lenders must look beyond legal ownership to identify de facto control relationships. Undisclosed or misidentified common management leading to a miscalculation of size standards can jeopardize the SBA guaranty. Interviewing principals and reviewing organizational charts is critical.","required_facts":["Day-to-day control","Policy setting","Strategic direction","Shared executives"],"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":"SBA size determination","url":"https://dealroom.so/glossary/sba-size-determination"},{"term":"size determination","url":"https://dealroom.so/glossary/size-determination"},{"term":"Common management","url":"https://dealroom.so/glossary/common-management"},{"term":"SBA 7(a) program","url":"https://dealroom.so/glossary/sba-7-a-program"},{"term":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-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/what-constitutes-common-management-triggering-affiliation-for-sba-7-a-size-determination","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."]}