{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/when-does-a-prior-contractual-relationship-create-affiliation-for-7-a-size-determination","api_url":"https://dealroom.so/api/public/questions/when-does-a-prior-contractual-relationship-create-affiliation-for-7-a-size-determination","question":"When does a prior contractual relationship create affiliation for 7(a) size determination?","topic":"Affiliation & size","audience":"lender","bot_mode":"lender","short_answer":"A prior contractual relationship can create affiliation if it establishes the power of one entity to control the other or creates economic dependence, even if the contract is terminated.","rule":"Affiliation can arise from present or past contractual relationships where one party gained the power to control the other, or where there is such economic dependence that the parties are effectively not separate. For instance, if a large contractor previously had an exclusive, long-term contract with a smaller subcontractor that gave the large contractor significant control over the smaller one's operations, this could trigger affiliation.","example":"Company A previously had an exclusive contract with Company B, where Company A dictated pricing, production, and sales for Company B for five years. Even if this contract has ended, the historical dominance could lead to an SBA finding of affiliation if there are lingering control elements or significant economic dependence, requiring both companies' financials to be combined for size standards.","what_lenders_check":"Lenders must investigate all significant past and present contractual relationships. Any relationship that suggests a history of control or undue influence must be carefully scrutinized to ensure proper size standard determination and avoid an eligibility issue for the 7(a) loan.","required_facts":["Contractual control","Economic dependence","Power to control","Prior relationship","Size standards"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 121 - Small Business Size Regulations","Affiliation and Lending Criteria for SBA Business Loan Programs - Final Rule"],"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 121 - Small Business Size Regulations","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-121"},{"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":"When does a contractual relationship between two businesses trigger affiliation for size standard calculations?","url":"https://dealroom.so/for-lenders/questions/when-does-a-contractual-relationship-between-two-businesses-trigger-affiliation-for-size-s"},{"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"}],"related_terms":[{"term":"size determination","url":"https://dealroom.so/glossary/size-determination"},{"term":"SBA size determination","url":"https://dealroom.so/glossary/sba-size-determination"},{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"SBA 7(a) program","url":"https://dealroom.so/glossary/sba-7-a-program"},{"term":"Standard 7(a) loan","url":"https://dealroom.so/glossary/standard-7-a-loan"},{"term":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-loan"}],"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-prior-contractual-relationship-create-affiliation-for-7-a-size-determination","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."]}