SBA Requests Remarks on Franchise Lending Program

The U.S. Small Business Administration (SBA) is requesting remarks from the public on all aspects of its franchise lending program.  The SBA issued its notice and request for comment December 8, 2014.  Comments must be submitted no later than February 6, 2015. Specifically the notice request comments on the following questions, some of which could require new statutory or regulatory authority:

(1) How can the review of franchise relationships be simplified and still ensure that SBA guaranteed loans are only provided to independent small businesses as required by law?
(2) Currently, when a small business loan applicant has or will have a franchise, license, dealer, jobber or similar relationship and such relationship (or product, service or trademark covered by such relationship) is critical to the applicant’s business operation, SBA requires a review of the agreement and any related documents governing the relationship (or product, service or trademark). Is it sufficiently clear what relationships are required to be reviewed under this standard?
(3) How does SBA’s process for determining affiliation (excessive control) of franchisors and franchisees affect small businesses during and upon termination of the franchise agreement?
(4) Should 13 CFR 121.103(i) be modified to specifically address the provisions SBA has determined evidence excessive control by the franchisor?
(5) Should 13 CFR 121.103(i) be modified to incorporate a reference to ‘‘Loan Program Requirements, as defined in 13 CFR 120.10,’’ because SBA’s policies in this area are explained in the Loan Program Requirements, and more particularly in SBA’s SOP 50 10?
(6) Should SBA develop a process to accept a certification of non-affiliation from a franchisor and/or its counsel, based on standards established by SBA, in lieu of SBA or lender review of the franchise agreement and related documents?
(7) If so, should that process be available only with respect to ‘‘renewal requests’’
(8) If an applicant is not a franchisee but has an affiliate that is a franchisee, should SBA continue to review the affiliate’s franchise agreement and related documents as part of the small business size determination of the applicant?
(9) Should SBA continue to list agreements on a central registry and, if so, where should that registry be maintained and by whom?
(10) If there is a cost associated with the maintenance of the registry or listing of agreements, who should bear that cost? SBA notes that there are statutory limitations on SBA’s current authority to charge, retain and use fees.
(11) In light of the fact that SBA lists approved franchises on its Web site, is there a need to continue to post the Franchise Findings List as well?
(12) Should the franchise agreement review process be streamlined and/or simplified and, if so, in what way?
(13) Should the franchise appeal process be changed and, if so, in what way?

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