For SBA lenders
Short answer
Common management exists when an individual or entity controls the day-to-day management, policy setting, or strategic direction of two or more businesses, even without majority ownership.
The SBA's affiliation rules consider common management as a control factor. If the same individual(s) or entity directs the operations or strategy of multiple businesses, those businesses may be affiliated, regardless of ownership percentages. This prevents businesses from circumventing size standards by creating separate legal entities under the same operational control.
A borrower owns 49% of Company A and 40% of Company B. While neither is a majority stake, the lender discovers the borrower serves as CEO for both companies and makes all key operational and strategic decisions. The lender determines that Company A and Company B are affiliated due to common management, requiring their revenues to be combined for size standard analysis.
Insider move
Lenders must look beyond legal ownership to identify de facto control relationships. Undisclosed or misidentified common management leading to a miscalculation of size standards can jeopardize the SBA guaranty. Interviewing principals and reviewing organizational charts is critical.
13 CFR Part 121 - Small Business Size Regulations
Affiliation and Lending Criteria for SBA Business Loan Programs - Final Rule
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 affiliation & size
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