SBA's list of franchise brands it has reviewed and found eligible. A brand that meets the FTC definition of a franchise must be on it for the loan to go ahead.
Before a lender sends a franchise request to SBA, or makes the loan on its own authority, it must check the Directory. If the brand meets the FTC definition and is not listed, the loan cannot go ahead. The lender enters the SBA Franchise Identifier Code, and the brand name, and where relevant the type of agreement, must agree with the Directory. A business with several brands is entered under the brand that earns the most revenue, and every brand with a franchise agreement must be listed. Gas stations with fuel supply agreements count as franchises. A franchise development agreement, which earns royalties from other franchisees, makes the applicant an ineligible passive business, though a multi-unit agreement with the applicant’s own units can qualify.
To add a brand, the franchisor sends its agreement, disclosure document and every document it requires a franchisee to sign to franchise@sba.gov. SBA reviews in the order received, and lists the brand after the franchisor signs a certification. SBA can remove a brand after a 30-day notice.
The lender must hold the executed franchise agreement before disbursing a 7(a) loan. If a brand is not listed and the lender decides it falls outside the FTC definition, the delegated lender bears the risk if SBA disagrees at purchase.
How it shows up in the data here
In the SBA loan file, FranchiseCode and FranchiseName identify the brand on a loan, when there is one. Loan Comps takes an industry, not a brand, so ask a lender how many loans it has made under a brand. Placement on the Directory is not an endorsement of the brand.
Go further
- SBA lenders by industry: Twenty-one industry groups, each with the lenders that made loans in it.
- SBA 7(a) loan package checklist: A 7(a) package is the bank's usual file plus SBA's own list. Know which items SBA requires and you can have them ready before the first call.
Related terms
- SBA 7(a) loan: SBA's main business loan program. A lender makes the loan and SBA guarantees part of it: up to 85 percent of $150,000 or less and 75 percent of more, on loans up to $5,000,000.
- SBA 504 loan: A fixed-asset financing in which a bank lends 50 percent or more, a certified development company funds up to 40 percent through an SBA debenture, and the borrower puts in at least 10 percent.
- Eligible passive company (EPC): A separate company that owns the real estate or equipment and leases all of it to the operating business, allowed under SBA rules when strict conditions are met.
- Delegated authority (SBA lending): Authority SBA grants a lender to make its own eligibility and credit decision before SBA issues a loan number: PLP and SBA Express for 7(a), ALP and PCLP for 504.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.