{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-due-diligence-is-required-for-a-franchise-not-on-the-sba-franchise-directory","api_url":"https://dealroom.so/api/public/questions/what-due-diligence-is-required-for-a-franchise-not-on-the-sba-franchise-directory","question":"What due diligence is required for a franchise not on the SBA Franchise Directory?","topic":"Franchise financing","audience":"borrower","bot_mode":"buyer","short_answer":"For a franchise not on the SBA Franchise Directory, the lender must submit the franchise agreement to the SBA for review and approval of its eligibility. This process can add significant time to the loan application.","rule":"If a franchise is not listed on the directory, the lender must manually review the entire franchise agreement to ensure it complies with SBA affiliation rules and other eligibility requirements. This often involves sending the agreement to the SBA for a formal eligibility determination, which can extend the processing timeline considerably.","example":"If you're buying a new or niche franchise that isn't on the directory, your lender will need to send the franchise disclosure document (FDD) and the franchise agreement to the SBA for an eligibility review. This could add several weeks or even months to your loan closing process.","what_lenders_check":"Lenders are concerned about the time and effort involved in a manual franchise review and the risk of the SBA deeming the agreement ineligible. They need to ensure the franchise relationship does not create an ineligible business structure or excessive control by the franchisor.","required_facts":["Not on directory","Lender submits for review","SBA eligibility approval","Adds processing time","Compliance with rules"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","13 CFR Part 121 - Small Business Size Regulations"],"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"},{"title":"13 CFR Part 121 - Small Business Size Regulations","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-121"}],"related_questions":[{"question":"What due diligence does the lender perform to ensure a franchise is eligible for SBA 7(a) financing?","url":"https://dealroom.so/sba-7a/questions/what-due-diligence-does-the-lender-perform-to-ensure-a-franchise-is-eligible-for-sba-7-a-f"},{"question":"What are the requirements for a franchisor to be listed on the SBA Franchise Directory?","url":"https://dealroom.so/sba-7a/questions/what-are-the-requirements-for-a-franchisor-to-be-listed-on-the-sba-franchise-directory"},{"question":"What is the typical down payment (equity injection) percentage for a franchise acquisition?","url":"https://dealroom.so/sba-7a/questions/what-is-the-typical-down-payment-equity-injection-percentage-for-a-franchise-acquisition"},{"question":"Are there minimum operating history requirements for a franchise system to be eligible for SBA loans?","url":"https://dealroom.so/sba-7a/questions/are-there-minimum-operating-history-requirements-for-a-franchise-system-to-be-eligible-for"},{"question":"Does the franchisor's financial strength and stability impact my SBA 7(a) loan approval?","url":"https://dealroom.so/sba-7a/questions/does-the-franchisor-s-financial-strength-and-stability-impact-my-sba-7-a-loan-approval"},{"question":"Can I use an SBA 7(a) loan to finance a franchise acquisition not listed on the SBA Franchise Directory?","url":"https://dealroom.so/sba-7a/questions/can-i-use-an-sba-7-a-loan-to-finance-a-franchise-acquisition-not-listed-on-the-sba-franchi"}],"related_terms":[{"term":"SBA Franchise Directory","url":"https://dealroom.so/glossary/sba-franchise-directory"},{"term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"term":"Franchise Directory","url":"https://dealroom.so/glossary/franchise-directory"},{"term":"SBA's Franchise Directory","url":"https://dealroom.so/glossary/sba-s-franchise-directory"},{"term":"Operational due diligence","url":"https://dealroom.so/glossary/operational-due-diligence"},{"term":"Legal due diligence","url":"https://dealroom.so/glossary/legal-due-diligence"}],"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":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/what-due-diligence-is-required-for-a-franchise-not-on-the-sba-franchise-directory","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."]}