SBA 7(a) Q&A
Short answer
Yes, franchises must meet specific SBA eligibility requirements, primarily ensuring the franchisee has sufficient control over the business and the franchisor does not exert 'undue control' as defined by SBA rules.
The SBA reviews franchise agreements to ensure they do not unduly restrict the franchisee's ability to operate independently or assign the loan. Franchises that give the franchisor excessive control over daily operations, financial decisions, or the ability to terminate the agreement without cause may be deemed ineligible. The SBA maintains a Franchise Directory of pre-approved systems.
A buyer wants to acquire a franchise where the franchisor dictates all pricing, supplier choices, and employee hiring decisions, and can terminate the agreement at will. This level of 'undue control' would likely make the franchise system ineligible for an SBA 7(a) loan, even if the business itself is viable.
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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