For SBA lenders
Short answer
The SBA reviews franchise agreements for provisions that grant the franchisor excessive control over the franchisee's business operations, finances, or management, which can render the franchisee ineligible.
SBA's franchise review process ensures that the franchisee has sufficient independence to manage its business. Agreements with 'undue control' provisions, such as those that dictate pricing, require mandatory purchases from the franchisor at non-competitive prices, or grant the franchisor the right to terminate without cause, are deemed ineligible. The SBA Franchise Directory lists pre-approved agreements.
A lender reviews a franchise agreement not on the SBA directory. It contains a clause stating the franchisor has the right to set all product prices and mandates purchasing specific raw materials exclusively from the franchisor at a fixed, non-negotiable rate. These clauses indicate undue control and would likely make the franchise ineligible.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
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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