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Franchise Financing Changes

The SBA recently made changes to the franchise review process you need to know a

bout. Prior to these changes, lender's responsibilities entailed reviewing the Franchise Registry or sending the Franchise Agreement to the SBA for approval. These two avenues informed you whether the franchise concept was eligible or not and, if not, potentially how to make it eligible via addendum.

Lenders must now obtain the executed Franchise Agreement and the SBA Addedum to Franchise Agreement (SBA Form 2462) or the executed Franchise Agreement, Franchisor Certification (SBA Form 2463) as well as the the SBA Negotiated Addendum. This Certification is to be used only if the 2015 or 2016 version of the Franchisor’s franchise agreement was reviewed by SBA and a franchisee applying for SBA financial assistance is or will be operating under a version of the Franchisor’s franchise agreement that includes the SBA Negotiated Addendum.

Keep in mind that these forms address only whether affiliation exists between the franchisor and the franchisee. All other eligibility aspects of the franchise concept are subject to the lender's review. A franchisor signing these documents does not make them eligible if the concept is still considered ineligible. Lenders should make certain they have franchise agreements reviewed by an attorney experienced in SBA.

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