Important Notes About the SBA Loan Eligibility Reviews for Franchise Brands

The Franchise Registry lists franchise systems whose franchisees enjoy the benefits of a streamlined review process for U.S. Small Business Administration (SBA) financing. Loan applications for franchises on the Franchise Registry can be reviewed and processed faster and more efficiently by the SBA and its lenders because the respective franchise agreements do not need to be reviewed in each individual franchisee situation.

This is because, through the Registry SBA Eligibility Review process, the SBA has already reviewed the franchise agreement and has determined that there are no unacceptable control provisions by the franchisor over its franchisees. Unacceptable control provisions could result in affiliation with a franchisor that is considered to be other than small; that would mean that a franchisee would not be considered to be a small business eligible for SBA financing.

A franchisorís participation in the Registry SBA Eligibility Review process is voluntary. If a franchisor decides not to have its agreements reviewed through this process, the SBA or its participating lenders will have to review and evaluate the franchise agreement when a franchisee or potential franchisee in that system seeks SBA financial assistance. This takes time. (You should not construe a franchise systemís presence on or an absence from the Registry as either an endorsement by SBA or an indication of the franchise systemís quality or profitability.)

SBA Eligibility Reviews on the Registry assure that the franchise agreement does not impose unacceptable control provisions on a franchisee or potential franchisee (which could result in affiliation with a franchisor). The lender and/or SBA must still consider and evaluate, with respect to each application for SBA financing, factors such as general eligibility, conflicts of interest, creditworthiness, use of proceeds, and discrimination. It is important to be aware that SBA does not finance operations covered by a development agreement, and no development agreement may be eligible through this process.
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