Glossary · The loan itself
Franchise rule
In short
The SBA has specific rules for how franchise businesses can qualify for 7(a) loans. It's not just about the business itself, but the franchise agreement's terms.
What it means in a deal
The SBA must approve the franchise agreement. Check the SBA Franchise Directory to see if the franchise is already approved. If not, the agreement needs to be reviewed to ensure it doesn't give the franchisor "control" in a way that makes the franchisee ineligible.
Official sources
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.
Related terms
Common questions about Franchise rule
- How does the 'franchise rule' affect affiliation calculations for SBA 7(a) eligibility?
- How does the "franchise rule" specifically apply to determine affiliation for an independent dealer or licensee model?
- How does the SBA define 'active ownership' for the 24-month rule?
- How does the 'not engaged in lending' rule apply to a loan applicant?
- What is the 24-month ownership rule for a $0-down SBA partner buyout?
- How does the SBA define 'total control' rule to determine affiliation for size standards?
Defined by CapBench 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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