Glossary · Reading the business
In short
This occurs when a franchisor has excessive control over the operations of the franchisee, making the franchisee appear more like an employee. The SBA specifically evaluates this to ensure the borrower truly owns and controls the business receiving the loan.
The SBA scrutinizes franchise agreements to ensure the borrower, not the franchisor, has operational control. If the franchisor dictates too many day-to-day decisions, the SBA might deem it undue control, making the business ineligible for a 7(a) loan. Review the Franchise Agreement carefully to identify potential issues.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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