For SBA lenders
Short answer
A minority equity stake can still create affiliation if it provides the holder with the power to control the business, for example, through a controlling loan, special voting rights, or shared management agreements.
Affiliation isn't solely based on majority ownership. The SBA looks at the ability to control. Even a minority owner can be deemed affiliated if they have contractual agreements (e.g., options, conversion rights), interlocking directorates, or de facto control through economic dependence or common management with another entity, giving them the power to control.
Investor A holds a 15% equity stake in Company B. However, Investor A also holds a convertible note that, if exercised, would give them 55% ownership. This minority stake, combined with the convertible note, could trigger affiliation with Company A.
Insider move
Lenders must review all equity and debt instruments, shareholder agreements, and management contracts to identify any individual or entity with the power to control. This requires a comprehensive review beyond simple ownership percentages.
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.
More on affiliation & size
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