For SBA lenders
Short answer
A lender assesses common economic dependence by examining whether a business relies on another for a substantial portion of its revenues or expenditures, even without common ownership or management.
Affiliation based on economic dependence occurs when one business derives 85% or more of its revenue from another business, or when it depends on another business for a substantial amount of outsourcing or subcontracts, making it economically dependent. This rule prevents larger entities from gaining eligibility through shell companies or highly reliant subcontractors.
A borrower applies for a 7(a) loan for a new distribution company. During underwriting, the lender discovers that 90% of the distribution company's projected revenue will come from a single, larger manufacturing company. The lender must determine if these two companies are affiliated due to economic dependence, potentially making the distribution company ineligible based on the manufacturer's size.
Insider move
Lenders must scrutinize relationships between entities, especially if one company appears to be a captive supplier or customer of another. Failure to identify affiliation can lead to an ineligible borrower and a non-guaranteed loan.
13 CFR Part 121 - Small Business Size Regulations
Affiliation and Lending Criteria for SBA Business Loan Programs - Final Rule
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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