SBA to Establish New Franchise Directory
Franchise brands that are currently not on the new SBA Franchise Directory are encouraged to apply for a listing prior to Jan. 1, 2018.
By Stephen J. Olear
The U.S. Small Business Administration (SBA) has announced a revision to its franchise procedures, including the establishment of a new SBA Franchise Directory. The directory will list brands that have been reviewed by SBA that meet both SBA’s affiliation and business eligibility requirements. Effective Jan. 1, 2018, SBA will require that all agreements that meet the Federal Trade Commission definition of a franchise be listed on the SBA Franchise Directory to qualify for SBA financing.
The directory will be organized by brands and will determine if the brand meets the definition of an FTC franchise, whether an addendum is required and, if so, whether the brand will utilize the SBA Standard Addendum (SBA Form 2462) or its own addendum negotiated with SBA in 2015 or 2016 (SBA Negotiated Addendum).
While not effective until Jan. 1, the SBA Directory already has more than 2,000 approved brands. Franchisors can check to see if their brand is listed correctly by going to www.sba.gov/document/support-object-object-sba-franchise-directory.
SBA is pleased to announce that there is no charge for listing on the directory (as in, free) and strongly encourages all franchise brands that are not currently listed on the directory to apply for listing prior to the Jan. 1 effective date.
Franchisors not currently listed may apply by sending the following information to SBA at email@example.com: 1. Franchise Disclosure Document; 2. Agreement; 3. Any other documents that the franchisor will require the franchisee to execute. SBA will review the documentation for eligibility. If the franchisor is using the SBA Standard Addendum (SBA Form 2462), no further review for affiliation will be conducted. If, however, an addendum is needed, and the franchisor would like to negotiate an addendum, SBA will work with the franchisor to create a Negotiated Addendum. Upon completion of SBA’s review and a determination that the brand is eligible, SBA will list the brand on the directory and determine which addendum (if any) is required.
Effective Jan. 1, SBA will no longer require a Franchisor Certification (SBA Form 2463) on a loan-by-loan basis with the use of the SBA Negotiated Addendum. In order to remain on the SBA Directory using either an SBA Negotiated Addendum or no addendum, a franchisor will have to provide a yearly certification (SBA Form 2464) stating that their current year franchise agreement can continue using the SBA Negotiated Addendum or still does not need an addendum.
SBA will accept Annual Certification for the 2018 Agreements starting on Jan. 1 by sending them to firstname.lastname@example.org. The deadline for receipt of the Certification is April 30 of each year. If franchisors have any questions, please contact SBA directly at email@example.com.
Stephen J. Olear is Chief Franchise Counsel at the Small Business Administration’s Office of the General Counsel in its Financial Law and Lender Oversight group.