SBA Announces Streamlined SBA-backed Lending Procedures for Franchisors

Lending Procedures for Franchisors

In November 2016, the SBA announced a streamline of the SBA-backed lending procedures for many franchisors. This process was refined in February 2017 and again in October 2017, and the latest round of revisions is set to take effect on January 1, 2018. Most notably, there is a new SBA “registry” (the “SBA Franchise Directory,” maintained by the SBA itself) that will provide a centralized list of every franchisor whose franchisees are eligible to obtain SBA-backed loans. Starting January 1, 2018, if a franchisor is not listed on the SBA Franchise Directory, then its franchisees will not be able to obtain SBA financing. Franchisors that wish to be included on the new SBA Franchise Directory should confirm whether they are already listed and if so, whether the information listed on the directory is accurate.

Franchisors that are eligible to be listed on the directory have the option to use either the SBA’s standard form of addendum to the franchisor’s franchise agreement, or a form of addendum that the franchisor has negotiated with the SBA. Depending on whether the franchisor is already listed on the SBA Franchise Directory, and which form of addendum the franchisor opts to use, an initial filing may be required to be added to the SBA’s directory, as well as annual certifications to remain on the directory.

Franchisors that are already on the SBA Franchise Directory won’t have to make an initial filing unless they wish to change which form of addendum they’re using. However, if a franchisor is already listed using its own negotiated form of addendum, it will have to submit an annual certification by April 30, 2018, in order to continue using it.

Franchisors that are not on the SBA Franchise Directory must submit an initial filing to become registered. Likewise, if a franchisor is listed but wishes to update or change its negotiated form, it will essentially need to submit an initial filing as well. Franchisors that file using the SBA standard form do not need to file annual certifications to remain on the directory.