{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/when-does-a-contractual-relationship-between-two-businesses-trigger-affiliation-for-size-s","api_url":"https://dealroom.so/api/public/questions/when-does-a-contractual-relationship-between-two-businesses-trigger-affiliation-for-size-s","question":"When does a contractual relationship between two businesses trigger affiliation for size standard calculations?","topic":"Affiliation & size","audience":"lender","bot_mode":"lender","short_answer":"A contractual relationship triggers affiliation when one business has the power to control the other through agreements, such as management agreements, franchise agreements (not on SBA directory), or exclusive supply contracts.","rule":"Affiliation exists when one business controls or has the power to control another, or a third party controls both. Contractual affiliation can arise from agreements that grant disproportionate control, like an agreement allowing one business to manage the operations of another, or exclusive agreements that significantly restrict a business's operational independence.","example":"Company A has a management agreement with Company B, giving Company A final decision-making authority over Company B's operational, financial, and personnel matters. This contractual relationship would trigger affiliation between A and B, requiring their revenues/employees to be aggregated for size standards.","what_lenders_check":"Lenders must meticulously review all agreements between the applicant and related businesses. They look for terms that grant control over operations, management, or finances, as these can easily lead to unforeseen affiliation issues impacting size eligibility.","required_facts":["Management agreements","Exclusive contracts","Operational control","Financial control","Common ownership"],"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 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"},{"question":"When does ownership by a private equity fund trigger affiliation for SBA size standard purposes?","url":"https://dealroom.so/for-lenders/questions/when-does-ownership-by-a-private-equity-fund-trigger-affiliation-for-sba-size-standard-pur"}],"related_terms":[{"term":"Size standard","url":"https://dealroom.so/glossary/size-standard"},{"term":"Business size standard","url":"https://dealroom.so/glossary/business-size-standard"},{"term":"Size standard compliance","url":"https://dealroom.so/glossary/size-standard-compliance"},{"term":"SBA size standard","url":"https://dealroom.so/glossary/sba-size-standard"},{"term":"Alternative size standard","url":"https://dealroom.so/glossary/alternative-size-standard"},{"term":"Small business size standard","url":"https://dealroom.so/glossary/small-business-size-standard"}],"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/when-does-a-contractual-relationship-between-two-businesses-trigger-affiliation-for-size-s","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."]}