For SBA lenders
Short answer
A franchisor's influence triggers affiliation if the franchise agreement grants the franchisor 'undue control' over the franchisee's operations, extending beyond standard franchisor-franchisee relationship protections.
SBA policy (SOP 50 10) outlines specific criteria for evaluating franchise agreements. While normal franchisor oversight (e.g., brand standards, marketing) is acceptable, excessive control over personnel, financing, or daily operational decisions that could significantly impact the franchisee's independence, can trigger affiliation for size determination.
A lender is reviewing a franchise agreement for a $500,000 7(a) loan. If the agreement dictates not only product standards but also sets all pricing, approves all hiring/firing decisions, and requires franchisor approval for all major expenditures, the lender might determine this constitutes 'undue control,' triggering affiliation between franchisor and franchisee.
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 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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