For SBA lenders
Short answer
When a borrower owns a minority stake in other businesses, the lender must review ownership agreements, operating agreements, and management structures to determine if 'negative control' or 'control through common management' exists, triggering affiliation.
Minority ownership (less than 50%) does not automatically preclude affiliation. The SBA considers 'negative control,' where a minority owner has the power to block significant actions, or 'common management,' where individuals manage multiple entities. Lenders must investigate if the borrower or its principals have such control mechanisms or shared management roles across these other entities, aggregating their size for eligibility.
A borrower applying for a 7(a) loan owns 30% of another company. The lender obtains the operating agreement for that company and discovers the borrower's 30% stake includes veto power over asset sales and hiring/firing of key executives. This 'negative control' triggers affiliation, requiring the lender to combine the revenues/employees of both businesses for size eligibility.
13 CFR Part 121 - Small Business Size Regulations
SOP 50 10 - Lender and Development Company Loan Programs
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.
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