New SBA Rules Are Here: Make Sure Your Franchise Brand is SBA Eligible

UPDATE: The SBA has extended, from July 31 to December 31, 2025, the deadline for franchise brands to complete the requirements to be listed on the SBA Franchise Directory. Franchisors now have until December 31 to execute the New SBA Franchisor Certification to ensure brands are listed on the reinstated directory.

Similar to the prior version that was discontinued in May 2023, the reinstated SBA Franchise Directory aims to streamline the process for lenders to determine if a brand meets the FTC definition of a franchise and whether there are additional issues SBA lenders must consider. Under the new SOPs, the required use of an SBA Addendum (either Form 2462 or a negotiated addendum) is being replaced by the one-time signing of a “Franchisor Certification” acknowledging the franchisor’s ongoing commitment to comply with the requirements necessary to be listed on the reinstated SBA Franchise Directory. Many requirements of the new Franchisor Certification are consistent with those included in Form 2462; however, additional obligations have been added, including that a franchisor is prohibited from unilaterally sharing, commingling, or withdrawing funds from a franchisee’s bank account, except as permitted for regularly scheduled payments and payments otherwise authorized in the franchise agreement.

What Do Franchisors Need to Do?

Franchisors currently listed on reinstated SBA Franchise Directory:

• Brands that were listed on the SBA Franchise Directory as of May 2023, and wish to remain on the reinstated SBA Franchise Directory, will now have until December 31, 2025, to review and sign the new Franchisor Certification, and submit it to the SBA.
• Until a franchisor’s Franchisor Certification has been received and processed by the SBA, the franchisor must continue to use the SBA Addendum listed in the reinstated SBA Franchise Directory, and the franchisor and lenders must continue to comply with any notes listed in the reinstated SBA Franchise Directory.
• Once a franchisor’s Franchisor Certification has been received and processed by the SBA, the franchisor will no longer be required to use an SBA Addendum, although the franchisor and lenders will still be required to comply with any notes listed in the reinstated SBA Franchise Directory.
• If a franchisor does not sign the Franchisor Certification by December 31, 2025, the brand will be removed from the reinstated SBA Franchise Directory, and its franchisees will not be eligible for SBA-backed financing.

Franchisors not listed on reinstated SBA Franchise Directory:

• Brands that were not listed on the SBA Franchise Directory as of May 2023, and wish to be included on the reinstated SBA Franchise Directory, must submit to the SBA their most current Franchise Disclosure Document (FDD), including the current franchise agreement and all ancillary documents that franchisees are required to sign.
• Complete submissions will be reviewed in the order in which they were received by the SBA.
• After the SBA reviews the materials submitted and determines the brand is eligible for SBA financing, the franchisor of the brand must then review and sign the Franchisor Certification provided by the SBA agent that conducted the review and submit it to the SBA.
• Once a franchisor’s Franchisor Certification has been received and processed by the SBA, the brand’s franchisees will be eligible for SBA-backed financing, although the franchisor and lenders will be required to comply with any notes listed in the reinstated SBA Franchise Directory.

If the SBA determines a franchise brand’s business model is ineligible, even after certification, its brand will not be listed on the reinstated SBA Franchise Directory.

Effective December 31, 2025, any brand that has not executed the Franchisor Certification will be removed from the Franchise Directory and its franchisees will no longer be eligible for SBA loans.

Although the SBA no longer requires franchisors to sign an SBA Addendum with their franchisees seeking SBA-backed financing, they may still want to enter into a form SBA addendum that tracks the requirements of the Franchisor Certification with these franchisees to ensure compliance.

Need help navigating the process or preparing a form SBA addendum? Our franchise team is here to help.