Franchise Eligibility Changes for SBA Loans –Effective January 1, 2014

Jessica SarterSBA Loans

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SBA’s new SOP 50 10 5 (F) contains some beneficial processing changes for PLP and SBA Express lenders and borrowers in determining whether an “affiliation” exists between the franchisor and franchisee that would make the loan ineligible under SBA size standards. If an affiliation is found to exist, the franchisor’s financial information would be combined with the borrower’s to determine size eligibility.

The new guidelines give PLP and SBA Express Lenders the option to submit the franchise agreement documentation to SBA for an affiliation determination. If the SBA determines that the parties are not affiliated based upon the submissions, the lender can proceed to process the loan. The lenders submit the documentation to While this gives the PLP and SBA Express lenders a “safe harbor” on affiliation with respect to the documents submitted, the borrower must still satisfy the individual size standards and other eligibility issues.

The Franchise Registry contains a list of franchise agreements that have been approved. Lenders must ensure that the executed franchise agreement matches the agreement posted on the registry.