{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-specific-elements-of-a-franchise-agreement-does-the-sba-review-to-determine-eligibili","api_url":"https://dealroom.so/api/public/questions/what-specific-elements-of-a-franchise-agreement-does-the-sba-review-to-determine-eligibili","question":"What specific elements of a franchise agreement does the SBA review to determine eligibility?","topic":"Franchise eligibility","audience":"lender","bot_mode":"lender","short_answer":"The SBA reviews franchise agreements for terms that restrict the franchisee's control over business operations, management, or financial decisions, ensuring the franchisee has sufficient independence to qualify as a small business.","rule":"SOP 50 10 requires the SBA to review franchise agreements to ensure the franchisee has the right to profit from their efforts and operate independently enough to meet the definition of a small business. Clauses that grant the franchisor excessive control over daily operations, pricing, or purchasing can render a franchise ineligible.","example":"The SBA reviews a franchise agreement and finds a clause stating the franchisor dictates all local marketing campaigns and pricing, leaving no discretion to the franchisee. This level of control could make the franchise ineligible.","what_lenders_check":"Lenders must understand the implications of franchise agreement terms on SBA eligibility. Approving a loan for an ineligible franchise due to restrictive terms will result in a guaranty repair or denial.","required_facts":["Franchisee control","Business operations","Management decisions","Financial decisions","Independence","Restrictive clauses"],"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":"Franchise Eligibility Review","url":"https://dealroom.so/glossary/franchise-eligibility-review"},{"term":"Franchise agreement","url":"https://dealroom.so/glossary/franchise-agreement"},{"term":"Franchise Review Portal","url":"https://dealroom.so/glossary/franchise-review-portal"},{"term":"Franchise eligibility requirements","url":"https://dealroom.so/glossary/franchise-eligibility-requirements"},{"term":"Aggregate SBA 7(a) Loan Eligibility","url":"https://dealroom.so/glossary/aggregate-sba-7-a-loan-eligibility"},{"term":"Breach of the Loan Agreement","url":"https://dealroom.so/glossary/breach-of-the-loan-agreement"}],"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-elements-of-a-franchise-agreement-does-the-sba-review-to-determine-eligibili","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."]}