For SBA lenders
Short answer
The SBA evaluates both the master franchise agreement and the sub-franchise agreement for eligibility, ensuring that both comply with SBA's franchise requirements and are listed on the Franchise Directory.
When a borrower is acquiring master franchise rights (to act as a sub-franchisor), or an existing sub-franchise, the SBA requires review of both the overarching master franchise agreement and the specific sub-franchise agreement. Both agreements must adhere to SBA's franchise eligibility policies, including addressing control over the franchisee, termination clauses, and proper listing on the Franchise Directory. The SBA 'looks through' to ensure no undue restrictions on the sub-franchisor or sub-franchisee.
A borrower applies for a 7(a) loan to purchase master franchise rights for a region, allowing them to sell individual franchises. The lender verifies that both the original franchisor's agreement and the borrower's proposed sub-franchise agreement are compliant and listed on the SBA Franchise Directory or are submitted for review.
Insider move
Lenders must carefully review the complexity of multi-tiered franchise structures. Ensuring both levels of agreements comply with SBA rules and are properly documented on the Franchise Directory is critical to avoid eligibility issues and potential guaranty repair.
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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