The SBA Franchise Directory is back

The US Small Business Administration (SBA) has reinstated its SBA Franchise Directory after a two-year hiatus. Widely hailed as a valuable resource by stakeholders, the SBA Franchise Directory is a list of franchisors maintained by the SBA who have demonstrated that they satisfy the SBA’s eligibility standards for SBA lending.

Initially launched in 2018, the purpose of the SBA Franchise Directory was to streamline the process by which franchisees could obtain SBA-backed loans. The SBA suspended the program in May 2023 in an effort to minimize its role in the lending process, but the absence of the directory led to longer loan processing times and, in some instances, lender hesitancy. Seeking to address these concerns, the SBA restored the SBA Franchise Directory to its website on June 1, 2025, and it is once again available as a resource for prospective franchisees and lenders.

Below, we discuss key changes to the SBA Franchise Directory.

Changes to the SBA Franchise Directory

With the reinstatement of the SBA Franchise Directory, the SBA has also announced a few changes to its policies. For instance, to be added to the SBA Franchise Directory, franchisors must submit the following to the SBA via email for review: copies of their franchise agreement; their Franchise Disclosure Document (FDD), if any; and any other documents that the loan applicant would be required to sign with the franchisor. Once the SBA determines that a brand meets the eligibility requirements, the franchisor must then submit to the SBA the new Franchisor Certification attesting that it will comply with the SBA’s policies. The Franchisor Certification contains certain material terms that, in some cases, may be different from a franchisor’s standard form of franchise agreement. In signing the Franchisor Certification, the franchisor is certifying that – as long as the SBA-assisted loan remains outstanding – it will not enforce any franchise agreement provision, or otherwise take any action that would be inconsistent with the terms of the Franchisor Certification. For example, the Franchisor Certification requires that a franchisor can exercise a contractual right of first refusal with respect to a partial interest in a franchisee’s business “only if the proposed transferee is not a current owner or family member of a current owner of Franchisee.” This new one-time Franchisor Certification will replace the franchise agreement Addendum that previously needed to be signed in connection with every franchise purchase that was financed by an SBA-backed loan.

Can a franchisor be “grandfathered” in?

Until July 31, 2025 (60 days after the SBA Franchise Directory was reinstated), franchisors that were included in the last SBA Franchise Directory can avoid having to reapply by simply submitting the executed Franchisor Certification. These previously approved brands have been “grandfathered” into the SBA Franchise Directory and do not need to undergo the approval process again. After that date, however, franchisors that were previously included in the Franchise Directory but did not timely submit the new Franchisor Certification will be required to undertake the approval process described above and will be regarded as a new SBA Franchise Directory applicant.

Although the Franchisor Certification only needs to be submitted one time, franchisors must ensure that they continue to comply with its terms. Indeed, the Franchisor Certification states that, if a franchisor makes any changes to its business model that it reasonably believes could impact its eligibility to be listed on the SBA Franchise Directory, it must immediately notify the SBA and provide updated documentation for review. Penalties for failing to comply include potential criminal prosecution and hefty fines. The SBA may also monitor brands and initiate enforcement action by removing brands that are not in compliance.

The SBA lending policies apply beyond traditional franchises

Another significant change to the SBA’s lending policies is that all brands that meet the definition of a “franchise” set forth in the Federal Trade Commission’s “Franchise Rule” must be included in the SBA Directory for their licensees to seek SBA funding. The SBA will be applying this definition broadly to licensing, dealership, and other arrangements – even if they are exempt from the Franchise Rule’s FDD disclosure requirements or do not consider themselves to be a traditional franchise. Business models that do not meet the Franchise Rule’s definition of a “franchise” but appear to be franchises in other respects may be included in the SBA Franchise Directory at their request if they comply with the other criteria.

If you have any questions or would like to discuss any issues relating to these changes to the SBA lending program, please contact the authors or your usual DLA Piper attorney.