Franchise Lending in 2025: Your Guide to SOP 50 10 8 Updates

Navigating the world of SBA lending can be complex, but understanding the specific eligibility criteria is key. For lenders, staying abreast of changes in Small Business Administration (SBA) policies is crucial for successful loan origination. The recent issuance of SOP 50 10 8 brings important updates, particularly concerning franchise lending. Let’s break down these changes and their implications.

What’s the Key Change?

The fundamental distinction now lies in how franchises are evaluated for SBA loan eligibility. Effective June 1st, 2025, SOP 50 10 8 introduces significant changes to the process of determining franchise eligibility. The SBA is moving towards a more streamlined approach, relying heavily on its Franchise Directory and refining the criteria for when a franchise agreement needs to be submitted for review. This aims to reduce the burden on lenders for common franchise concepts while ensuring compliance for unique or new agreements. These changes revert back to a very similar process during the pre-COVID era of SBA franchise lending.  The directory was always where lenders would review franchises until it was discontinued on May 5, 2023. SBA is now bringing it back.

Important Definitions and Clarifications in SOP 50 10 8

SOP 50 10 8 provides clear definitions and outlines specific scenarios related to franchise lending, which are vital for lenders to understand:

• Reliance on the Franchise Directory: The SBA will place greater emphasis on its online Franchise Directory. For franchises listed on the directory with an “SBA Approved” status, lenders can generally proceed without submitting the franchise agreement for a separate review, assuming the agreement presented is identical to the one on file.
  
  
• “Ineligible” or “Unlisted” Franchises: If a franchise is listed as “Ineligible” on the directory, it cannot receive SBA financing. If a franchise is “Unlisted” or “Under Review,” the lender will need to submit the franchise agreement to the SBA for review and determination of eligibility.
  
  
• New Master Agreements and Amendments: Even for “SBA Approved” franchises, if there is a new master franchise agreement that has not been reviewed by the SBA, or if the existing agreement has been materially amended, the lender must submit the new or amended agreement for SBA review. This ensures the SBA can assess any new terms that might impact eligibility.
  
  
• Addendums and Riders: The SOP clarifies that certain standard addendums or riders to a franchise agreement, such as those related to specific state requirements or landlord consents, typically do not require a separate SBA review, provided they do not alter the fundamental relationship between franchisor and franchisee in a way that impacts SBA eligibility.
  
  
• Affiliation Considerations: The SOP reiterates and provides further guidance on how franchise agreements can create affiliation issues, particularly regarding control and common management. Lenders must carefully review agreements for terms that could lead to an affiliation between the franchisor and franchisee, which could impact the small business size standard.

How to Add a Franchise to the SBA Directory

A crucial part of this new process is ensuring a brand is listed on the Directory. If a brand that meets the FTC definition of a franchise is not on the Directory, an application cannot proceed. Here is the procedure for a franchisor to add their brand:

1. Submission: A franchisor must submit its franchise agreement, Franchise Disclosure Document (FDD) (if applicable), and all other required franchisee documents to [email protected] for an eligibility review. If a third party submits on behalf of the franchisor, they must include the franchisor’s name and email address.
   
   
2. Review: The SBA Franchise Team reviews submissions in the order they are received. In some cases, the SBA may request additional documents, like the franchise operations manual, for their review.
   
   
3. Certification: Upon determining the brand is eligible, the SBA will send a Franchisor Certification to the franchisor for signature.
   
   
4. Listing: Once the properly signed certification is returned to [email protected], the SBA will list the brand on the Directory. If the brand meets the FTC definition, it will be assigned an SBA Franchise Identifier Code.

The SBA may remove a brand from the Directory for non-compliance, submitting false information, or other violations, after providing a 30-day notice and opportunity to respond.

A Note on Recertification for Existing Brands

For lenders working with established franchises, the SBA has provided an important timeline extension. Franchisors that were listed on the SBA Franchise Directory as of May 2023 now have more time to complete the required recertification process under the new system.

The deadline for this recertification has been extended to December 31, 2025.

This extension means that for brands pending the new certification, lenders can continue to use the existing Addendum noted on the Directory until the end of the year. It is important to note that any brand not successfully recertified by the December 31, 2025, deadline will be removed from the Directory and become ineligible for SBA financing.

Verification and Certification Requirements

With these new requirements, the process for verifying franchise eligibility has become more stringent and centralized:

• Lender Due Diligence: Lenders are required to conduct thorough due diligence to confirm the franchise’s status on the SBA Franchise Directory. This is the primary verification step.
  
  
• Documentation for Unlisted/Amended Agreements: If a franchise is “Unlisted,” “Under Review,” or if a new or materially amended agreement is being used, lenders must properly submit the full franchise agreement package to the SBA for eligibility determination prior to loan approval.
  
  
• Certification of Review: Lenders must certify that they have reviewed the franchise agreement (or verified its status on the directory) and that the agreement meets all SBA eligibility requirements, particularly those concerning control, management assistance, and capital injection.

Advantages and Opportunities for Lenders

The shift mandated by SOP 50 10 8 underscores the SBA’s focus on clarity and efficiency in franchise lending and presents distinct advantages and opportunities for diligent lenders:

• Enhanced Efficiency for Approved Franchises: For the vast majority of commonly financed franchises already on the SBA Approved list, lenders can experience faster processing times by relying on the directory, reducing the need for individual agreement internal lender reviews for franchise eligibility.
  
  
• Clearer Guidelines for New Franchises: The detailed guidance for unlisted or amended agreements provides a clear roadmap for lenders when encountering less common or evolving franchise concepts, ensuring proper compliance from the outset. The SOP shifts responsibility for franchise eligibility reviews from the lender back to the SBA.
  
  
• Reduced Risk of Errors: By centralizing the approval status through the Franchise Directory and providing explicit submission requirements, the SOP helps lenders avoid common pitfalls related to franchise eligibility.
  
  
• Leveraging Technology: The increased reliance on the Franchise Directory highlights the benefit of leveraging technology and tools to quickly verify franchise status and manage the submission process for unlisted or amended agreements.

How This May Impact Those Seeking a Loan

As a small business owner or an individual seeking an SBA loan for a franchise, these distinctions and recent changes can indirectly affect your experience.

• Faster Processing for Approved Franchises: If the franchise you are interested in is already listed as “SBA Approved” on the Franchise Directory, your loan application process with your chosen lender could be smoother and potentially faster.
  
  
• Potential for Longer Review for New Franchises: If your chosen franchise is “Unlisted” or “Under Review,” or if it uses a new or heavily amended agreement, the SBA will need to review the agreement, which could add time to your loan approval process.
  
  
• Lender Expertise is Key: Choosing a lender with deep knowledge and experience in SBA franchise lending and current SOP 50 10 8 guidelines becomes even more critical to ensure a smooth application process and proper eligibility determination.

Your Partner in Navigating Franchise Lending Complexity

The SOP 50 10 8 updates for franchise lending aim for efficiency but place a significant due diligence burden on lenders. Knowing when to rely on the SBA Franchise Directory versus when to conduct a deeper review of an unlisted or amended agreement is critical, and the risk of an error rests with you. Navigating this new landscape requires a high level of expertise, but you don’t have to manage this complexity alone.

This is where Windsor Advantage becomes a critical partner. With more than 150 years of cumulative SBA lending experience, our team has the deep expertise required to give you confidence in your franchise eligibility decisions. We provide banks, credit unions, and CDFIs with a comprehensive outsourced SBA 7(a) and USDA lending platform, built on cutting-edge technology and rigid, consistent processes.

For lenders navigating the nuances of the Franchise Directory, amended agreements, or potential affiliation issues, Windsor Advantage acts as an extension of your team. We ensure every franchise loan is processed with the highest level of diligence, mitigating the risk of eligibility errors and helping you maintain a thoughtful and profitable government-guaranteed lending initiative.

For questions about structuring loans or prequalification needs under the new SOP, please feel free to reach out to [email protected].

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