For SBA lenders
Short answer
A franchise must be listed on the SBA Franchise Directory, or if not, the franchise agreement must be reviewed by the SBA to ensure it does not restrict the franchisee's right to profit or manage the business.
The SBA maintains a directory of eligible franchise systems. If a franchise is not on this list, the lender must submit the franchise agreement to the SBA for review. The SBA ensures that the agreement does not contain provisions that limit the franchisee's operational control, which could violate SBA policy.
A lender receives an application for a franchise that is not on the SBA Directory. The lender must then request the franchise agreement and submit it to the SBA for a formal review of its eligibility, ensuring no "affiliation clauses" or "control clauses" exist.
Insider move
Lenders must verify the franchise's eligibility through the SBA Directory or ensure timely submission of the franchise agreement for review. Processing a loan for an ineligible franchise can result in a guaranty denial.
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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