Best Practices: SBA Franchisor Certification

Per SBA Information Notice 5000-866746 effective April 21, 2025, SBA set forth the process for reinstituting the SBA Franchise Directory (“Directory”) and the steps franchisors must take to remain as an eligible brand on the Directory.

In order to be listed on the Directory as of July 1, 2026, the franchisor must have signed and submitted the SBA Franchisor Certification (“Certification”) to SBA.  The Certification is a three-page document in which the franchisor certifies that, inter alia, each agreement between franchisor and franchisee that receives SBA financing will comply with the following:

1. Franchisor may only exercise an option to purchase or a right of first refusal for a partial interest in the franchisee’s business if the proposed transferee is not a current owner or family member of a current owner.
2. Franchisor will not unreasonably withhold consent to a transfer of the franchisee’s business.
3. If the franchisee owns the real estate where the business is located, the franchisee will not be required to sell the real estate upon franchise default or termination but may be required to lease the real estate for fair market value.
4. If the franchisee owns the real estate where the business is located, the franchisor will not place any restrictions on the real estate.
5. If the franchisee owns the real estate where the business is located, the franchisor will not record the franchisor’s right to assume the franchisee’s lease and will not include an attornment unless it is subordinated to the SBA.
6. Other than payments authorized by the franchise agreement, franchisor has no authority to unilaterally share, commingle or withdraw funds from franchisee’s bank account.
7. The franchise agreement does not prevent the franchisee from having meaningful oversight over the business, which includes authority to approve the annual budget, have control over the bank accounts and have oversight over all employees.

The Certification replaces the SBA Form 2462 Addendum and SBA Negotiated Addendums.  If an SBA loan was approved prior to June 30, 2026, but the franchisor did not sign the Certification, a lender can still close the loan with a fully executed SBA Form 2462 Addendum or the SBA Negotiated Addendum, as required, if the franchisor was listed on the Directory at the time of SBA approval.  For all SBA loans approved after June 30, 2026, the franchisor must be listed on the Directory and must have signed and submitted the Certification to SBA to be eligible for SBA financing.

For any franchisor that is looking to add its brand to the Directory, it will need to submit its franchise disclosure document and all documents that the franchisor requires the franchisee to sign to franchise@sba.gov.  After review and approval by the SBA of its franchise documents, the franchisor will need to sign the Certification to be added to the Directory.

For assistance with SBA lending matters, contact the attorneys at Starfield & Smith, PC at 215.542.7070 or visit us at www.starfieldsmith.com.