For SBA lenders
Short answer
A minority equity stake can create affiliation if it provides the holder with negative control, such as veto rights over critical business decisions, or if a third party controls both entities.
Affiliation is not solely based on majority ownership. If a minority owner has the power to prevent a quorum or block significant actions like amendments to articles of incorporation, it constitutes negative control and triggers affiliation. The SBA considers control in all forms, not just positive control.
Company X owns 30% of Applicant Company A, but its operating agreement grants Company X veto power over budget approvals and strategic hires. Despite owning a minority stake, Company X and Company A are affiliated due to Company X's negative control.
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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