SBA 7(a) Q&A
Short answer
Yes, if a franchise is not on the SBA Directory, the lender must submit the franchise agreement to the SBA for review and approval to ensure it meets eligibility requirements, specifically regarding control and restrictions.
Franchise agreements must not contain terms that grant the franchisor undue control over the franchisee, restrict the franchisee's ability to operate independently, or assign the loan. If a franchise is not listed, the lender must forward the entire franchise agreement to the SBA for a full review and determination of eligibility before proceeding with the loan.
A buyer wants to acquire a unique regional franchise, 'Local Eats,' not listed on the SBA Directory. The lender will need to send the 'Local Eats' franchise agreement to the SBA for a thorough review. If the SBA finds clauses that give the franchisor excessive control, the franchise system will be deemed ineligible for 7(a) financing.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
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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