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Major Affiliate Changes to SBA 504 Loan Program

Apr 26, 2023

The U.S. Small Business Administration (SBA) has released several regulation amendments for their 504 loan program, two of which include regulations on affiliation standards. These changes will simplify the application process and help more businesses become eligible for the program.

The affiliation amendments include:

Elimination of SBA Review of Agreements

Approval of Franchise, Dealer, Licensing, Management and other agreements will no longer be completed by SBA.  We will still need to review for restrictive terms pertaining to financing & collateral, however, SBA will not review for affiliation.  Borrowers previously ineligible because of these types of agreements may now be eligible.

Simplified Affiliation Determinations 

Affiliates will now be primarily based on ownership and similar industries. All other principles previously used to determine affiliation such as control, identity of interest, etc. have been removed.

The amendments above are effective May 11, 2023, and will significantly impact the SBA 504 loan program. Not only will it lessen the amount of paperwork required for application, but they will reduce the number of entities considered affiliates according to SBA size standards. This means a simplified application process and more businesses who will now be eligible for the program.

If your business was previously ineligible for SBA 504 financing due to affiliation requirements, please reach out to one of our loan officers to resume the conversation. These amendments may make your project possible.