For SBA lenders
Short answer
If a franchise system is not on the SBA Franchise Directory, the lender must submit the franchise agreement and all related documents for a full SBA review to determine its eligibility and compliance with SBA franchise requirements.
Franchise systems must comply with specific SBA requirements to be eligible for 7(a) financing, primarily concerning the independence of the franchisee. The Franchise Directory lists systems that have already been reviewed and deemed compliant. If a system is not listed, the lender cannot assume eligibility. They must submit the franchise agreement, disclosure document (FDD), and any other relevant agreements to the SBA for a manual review to confirm compliance.
A borrower seeks a $700,000 7(a) loan to open a new location for 'Gourmet Grillz,' a regional fast-casual franchise. The lender checks the SBA Franchise Directory and 'Gourmet Grillz' is not listed. The lender then obtains the full franchise agreement and FDD and submits them to the SBA for a specific eligibility review before proceeding with the loan application.
Insider move
Lenders are concerned about the eligibility of the franchise system. Proceeding with a loan for an unlisted franchise without a prior SBA review could lead to a non-eligible loan and a potential guaranty repair or denial.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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