Main Street Monday – SBA Will Remove the Franchise Directory in May

April 10, 2023

Delaney Sexton
Contributing Editor

Main Street Monday – SBA Will Remove the Franchise Directory in May

On May 11, 2023, the final rule that the SBA published today will be effective. As a result, the SBA will no longer be publishing the Franchise Directory beginning on that day. The SBA reportedly received 54 comments about this proposed revision.

Commenting on the reason for removing the Franchise Director, the rule states: “These revisions remove the principle of control of one entity over another from consideration of affiliation; therefore, the mere fact that an applicant may be a franchisee is not in itself a reason that would render the applicant ineligible for an SBA loan, and thus there is no longer a compelling reason to maintain the SBA Franchise Directory.”

Further, the SBA also states that the fact that a franchise is listed on the Directory does not relieve the SBA lender from determining whether an applicant meets all eligibility and loan program requirements.

The SBA is removing provisions on affiliation arising from management and control, franchise or license agreements, and identity of interest to streamline affiliation determinations based on ownership. This also entails removing the principle of control of one entity over another from affiliation considerations.

Lenders will still be required to examine franchised businesses for affiliation based on ownership, but neither the SBA nor the lender will review the applicant for affiliation with other entities beyond ownership.

Source:
Final Rule