On April 26, 2025, the U.S. Small Business Administration (SBA) announced that it will reinstate the SBA Franchise Directory, effective June 1, 2025. This decision marks a significant policy shift following the discontinuation of the directory in 2023 established in 2018. Urgent action must be undertaken if franchisors want their franchisees to qualify for SBA financing. Without this action, then franchise development could be delayed.
Background
The SBA designed the Directory to streamline the loan process—not only for lenders, but also for franchisors and franchisees seeking SBA-backed financing. Although inclusion does not imply SBA endorsement, it indicates that the franchise system’s agreements and disclosures have undergone review and meet the SBA’s eligibility criteria. The SBA’s announcement responds to feedback from lenders and franchisors who experienced increased documentation burdens and inconsistent determinations after the directory’s removal. Without a centralized list, many brands and their franchisees faced delays and uncertainty in the loan process.
How the Franchise Directory Will Work
The reinstated Directory will enhance efficiency and consistency in SBA loan eligibility reviews by enabling lenders to quickly confirm whether a franchise brand meets SBA affiliation standards. The SBA will maintain the Directory on its website. It will include the SBA’s determination of whether the brand meets the FTC definition, the SBA Identifier Code (if applicable), and any additional considerations SBA lenders must evaluate regarding the brand.
Under the reinstated policy, if an applicant’s brand meets the Federal Trade Commission (FTC) definition of a “franchise” under 16 CFR § 436, then the brand must appear on the Directory for its franchisees to obtain SBA financing. Franchisors who were on the old directory will be fast-tracked for approval if they timely act.
Key Procedures and Requirements:
- Free listing: Listing on the Directory is free. Franchisors may begin submitting application materials for review on June 1, 2025.
- Franchisor Certification: Once the SBA determines eligibility, the franchisor must sign and return a Franchisor Certification to the SBA.
- Certification replaces Addendum: The SBA Addendum (Form 2462 or a negotiated addendum) is no longer required. Franchisors must instead submit the signed Certification acknowledging the conditions for Directory listing.
- Maintain listing for previously listed brands: Franchisors listed on the Directory as of May 2023 must enroll by July 31, 2025, to remain listed. If they fail to timely do so, they should expect delays in franchise loans being processed, which could adversely impact franchise development.
For franchisors, the reinstated Directory offers an opportunity to reduce financing friction for prospective franchisees. Brands that rely on SBA-backed lending as a core growth strategy should consider submitting materials early to ensure timely inclusion.
Manning Fulton’s franchise team is available to assist franchisors in renewing their enrollment on the Franchise Directory or becoming registered. Please contact Ritchie Taylor or Elliot Boerman at Manning Fulton for more details.