The SBA [U.S. Small Business Association] is asking for your comment. In December the SBA published a request for comment regarding the franchise reviews, affiliations and eligibility for the financial assistance.
SBA can be great source for franchisee start-up capital. But, many franchisors will tell you that the lending process can be rough. Here are the issues up for comment. The list is long……
(1) How can the review of franchise relationships be simplified?
(2) What relationships require review under the standard independence standard, franchises, licenses, dealers, jobbers, and what other similar relationships?
(3) How does SBA’s process for determining excessive control of franchisors and franchisees affect small businesses during and upon termination of the franchise agreement?
(4) Should regulations be modified to specifically address the franchise provisions SBA has determined evidence excessive control by the franchisor?
(5) Should regulations be modified to incorporate a reference to “Loan Program Requirements?
(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”—i.e., only for franchisors that have had franchise agreements reviewed and approved by SBA in a prior year?
(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, who should bear that cost? Should there be a charge for listing of agreements on a registry and, if so, who should bear the cost for such listing? 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?
Hurry, if you have a comment. The deadline for responding to the SBA’s request for comment is February 6, 2014. Contract us about making a comment on the SBA lending process.
Look for our next post discussing SBA list of the hot button issue commonly found in franchise agreements.