{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-specific-due-diligence-is-required-for-an-unlisted-franchise-agreement-lacking-sba-fo","api_url":"https://dealroom.so/api/public/questions/what-specific-due-diligence-is-required-for-an-unlisted-franchise-agreement-lacking-sba-fo","question":"What specific due diligence is required for an unlisted franchise agreement lacking SBA formal review?","topic":"Franchise eligibility","audience":"lender","bot_mode":"lender","short_answer":"A lender must submit the unlisted franchise agreement directly to the SBA for review, along with a completed Franchise Agreement Addendum, to determine its eligibility for 7(a) financing.","rule":"Franchise systems not listed on the SBA Franchise Directory have not undergone formal SBA review. For these, the lender must submit the full franchise agreement, disclosure documents, and a completed SBA Franchise Addendum to the SBA Franchise Team for a determination of eligibility. This review ensures the agreement does not contain objectionable clauses (e.g., undue franchisor control) that would render the franchisee ineligible.","example":"A borrower applies for a 7(a) loan to open a new concept franchise that is not on the SBA Directory. The lender collects the entire franchise agreement package, including the Franchise Disclosure Document, and submits it to SBA's franchise team with the required addendum for eligibility determination prior to full underwriting.","what_lenders_check":"Lenders must never assume an unlisted franchise is eligible. Proceeding with a loan to an unlisted franchise without SBA's explicit determination of eligibility is a common cause for guaranty denial, as the underlying agreement might contain disqualifying provisions.","required_facts":["Unlisted franchise","SBA review requirement","Franchise Agreement Addendum","Undue control assessment"],"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":"Unlisted Franchise Agreement","url":"https://dealroom.so/glossary/unlisted-franchise-agreement"},{"term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"term":"Operational due diligence","url":"https://dealroom.so/glossary/operational-due-diligence"},{"term":"Legal due diligence","url":"https://dealroom.so/glossary/legal-due-diligence"},{"term":"Inadequate due diligence","url":"https://dealroom.so/glossary/inadequate-due-diligence"},{"term":"Heightened due diligence","url":"https://dealroom.so/glossary/heightened-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":"2026-06-13","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-specific-due-diligence-is-required-for-an-unlisted-franchise-agreement-lacking-sba-fo","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."]}