For SBA lenders
Short answer
If a franchise is not on the SBA Franchise Directory, the lender must submit the franchise agreement and related documents to the SBA for review. The SBA evaluates whether the agreement grants the franchisor undue control over the franchisee's operations, making it ineligible.
The SBA's Franchise Directory lists franchise agreements pre-approved for 7(a) financing. For unlisted franchises, the SBA reviews the franchise agreement to ensure it does not violate the 'affiliation' rule, specifically the 'control' aspect. If the franchisor has excessive control over the franchisee's management, operations, or credit decisions, the franchisee might be deemed an affiliate of the franchisor, potentially making the franchisee ineligible as a 'small business'.
A lender is processing a 7(a) loan for a new pizza franchise. Discovering it's not on the directory, the lender submits the franchise agreement to the SBA. The SBA reviews it for clauses like mandatory suppliers, pricing control, or excessive operational oversight that would indicate undue franchisor control.
Insider move
Lenders must be cautious with unlisted franchises due to the risk of affiliation issues. A thorough review of the agreement by legal counsel and submission to the SBA are critical to avoid a guaranty repair based on eligibility.
SOP 50 10 - Lender and Development Company Loan Programs
13 CFR Part 121 - Small Business Size Regulations
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.
More on franchise eligibility
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