SBA Eliminating Franchise Directory

Update provided by Alana McGinnis | NFS Project Coordinator

The Small Business Administration (SBA) recently announced the discontinuation of its franchise directory, effective May 11th. The directory was established five years ago to help lenders determine whether a franchise was eligible for SBA financing and for potential franchisees to assess brand reputation.

Although the elimination of the directory may increase the workload for lenders and entrepreneurs in assessing franchise eligibility, it can also bring about positive changes. Moreover, with the SBA directory's discontinuation, lenders can benefit from alternative resources like FRANdata's Franchise Registry, a reliable source of franchise industry research for over 35 years.

FRANdata has been instrumental in helping franchisors navigate SBA processes and is highly regarded by the SBA. The move may also encourage lenders to develop their in-house legal expertise, which can lead to a better understanding of the industry and potential opportunities. 

The SBA received mixed responses with some praising the directory’s effectiveness and others citing delays and additional costs. 

Overall, the new changes will require lenders to conduct more research and due diligence, leading to a more informed decision-making process. While there may be initial challenges in adapting to these changes, they present an opportunity for lenders to deepen their knowledge and expertise in the franchise industry and explore alternative approaches to franchise eligibility assessment. 

Lenders are waiting for the SBA to release the updated SOP before they can determine in-house policy changes.