For SBA lenders
Short answer
It depends on the specific terms of the consulting contract and the minority interest. Even with less than 20% equity, 'control' through contractual relationships or dominant influence can trigger affiliation.
Affiliation is based on 'control,' which can be actual or contractual, not just majority ownership. If a former owner, despite holding a minority interest, retains a consulting agreement that grants significant managerial decision-making authority or influence over the new business's operations, it could establish control and trigger affiliation. Lenders must analyze the substance of the agreement.
A $1.2M acquisition loan involves a seller retaining 15% equity and a 3-year consulting agreement requiring seller approval for all capital expenditures over $10,000. The lender analyzes this contractual term, concluding that the seller retains undue control, thus triggering affiliation between the new and old entity for size standard purposes.
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
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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.
More on affiliation & size
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