For SBA lenders
Short answer
Affiliation arises from contractual relationships or franchise agreements when one entity has the power to control the other, especially through restrictive covenants or the right to control business operations.
The SBA's 'power to control' principle applies to contractual agreements. If a contract, such as a franchise agreement, management agreement, or similar arrangement, gives one business the ability to control the other's operations, management, or governance, then affiliation is triggered. Franchises are generally affiliated with their franchisor unless listed on the SBA Franchise Directory or individually reviewed and approved.
A borrower applies for a loan to open a new franchise. The franchise agreement grants the franchisor significant control over pricing, marketing, purchasing, and operational decisions. The lender determines the borrower is affiliated with the franchisor because of the extensive control provisions, unless the franchise is pre-approved by the SBA.
SOP 50 10 - Lender and Development Company Loan Programs
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.
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