For SBA lenders
Short answer
The SBA reviews franchise agreements for terms that restrict the franchisee's control over business operations, management, or financial decisions, ensuring the franchisee has sufficient independence to qualify as a small business.
SOP 50 10 requires the SBA to review franchise agreements to ensure the franchisee has the right to profit from their efforts and operate independently enough to meet the definition of a small business. Clauses that grant the franchisor excessive control over daily operations, pricing, or purchasing can render a franchise ineligible.
The SBA reviews a franchise agreement and finds a clause stating the franchisor dictates all local marketing campaigns and pricing, leaving no discretion to the franchisee. This level of control could make the franchise ineligible.
Insider move
Lenders must understand the implications of franchise agreement terms on SBA eligibility. Approving a loan for an ineligible franchise due to restrictive terms will result in a 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
Terms in this answer
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