{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-factors-are-considered-when-evaluating-affiliation-between-businesses-that-share-comm","api_url":"https://dealroom.so/api/public/questions/what-factors-are-considered-when-evaluating-affiliation-between-businesses-that-share-comm","question":"What factors are considered when evaluating affiliation between businesses that share common management?","topic":"Affiliation & Size","audience":"lender","bot_mode":"lender","short_answer":"Common management triggers affiliation when individuals or entities controlling the management of one business also control the management of another. Factors include shared officers, directors, or key employees, and the ability to control decision-making.","rule":"SBA's affiliation rules are designed to prevent large businesses from circumventing size standards by organizing into smaller entities. Common management exists when one or more individuals or entities have the power to control the board of directors, management, or operational decisions of both businesses. This 'power to control' is the key factor, even if not exercised.","example":"A borrower for a 7(a) loan owns a construction company. The lender discovers that the borrower is also the CEO and sole director of an unrelated real estate development firm. Despite no direct ownership link between the firms, the common management (the borrower) means the two businesses are affiliated for size determination.","what_lenders_check":"Lenders must thoroughly investigate management overlaps to accurately determine size eligibility. Undisclosed or misidentified affiliations based on common management can result in the borrower exceeding the size standard, rendering the loan ineligible and jeopardizing the SBA guaranty.","required_facts":["Common management","Control ability","Shared officers","Board influence","Operational control"],"source_families":["13 CFR Part 121 - Small Business Size Regulations","SOP 50 10 - Lender and Development Company Loan Programs","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":"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":"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":"How does the SBA define 'affiliation' when checking business size?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-define-affiliation-when-checking-business-size"},{"question":"When does common management or shared facilities trigger affiliation for SBA 7(a) size determination?","url":"https://dealroom.so/for-lenders/questions/when-does-common-management-or-shared-facilities-trigger-affiliation-for-sba-7-a-size-dete"},{"question":"What are the financial criteria for a business to qualify as 'small' under the alternative size standard?","url":"https://dealroom.so/for-lenders/questions/what-are-the-financial-criteria-for-a-business-to-qualify-as-small-under-the-alternative-s"},{"question":"Does an unfunded stock option agreement trigger affiliation for SBA 7(a) size standard calculations?","url":"https://dealroom.so/for-lenders/questions/does-an-unfunded-stock-option-agreement-trigger-affiliation-for-sba-7-a-size-standard-calc"},{"question":"What criteria does the SBA use to determine common management that triggers affiliation for size standard purposes?","url":"https://dealroom.so/for-lenders/questions/what-criteria-does-the-sba-use-to-determine-common-management-that-triggers-affiliation-fo"},{"question":"How does a lender determine affiliation when a prior owner retains less than 20% equity and a consulting contract?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-determine-affiliation-when-a-prior-owner-retains-less-than-20-equity-and"}],"related_terms":[{"term":"Common management","url":"https://dealroom.so/glossary/common-management"},{"term":"Compensating factors","url":"https://dealroom.so/glossary/compensating-factors"},{"term":"Affiliated businesses","url":"https://dealroom.so/glossary/affiliated-businesses"},{"term":"Mitigating factors","url":"https://dealroom.so/glossary/mitigating-factors"},{"term":"Affiliation","url":"https://dealroom.so/glossary/affiliation"},{"term":"Ownership Share","url":"https://dealroom.so/glossary/ownership-share"}],"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-factors-are-considered-when-evaluating-affiliation-between-businesses-that-share-comm","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."]}