What the SBA’s 2025 SOP Changes Mean for Franchisors and Franchisees
/Franchisors and franchisees take note: The Small Business Administration (SBA) has announced sweeping updates to its Standard Operating Procedures (SOPs) set to take effect in 2025. These changes impact everything from documentation requirements to eligibility standards and they could significantly affect access to SBA-backed financing, which supports an estimated $5.6 billion in franchise loans annually.
Here’s what you need to know to stay ahead of the curve.
1. The Franchise Directory is Back (and It’s Not Optional)
The SBA is reinstating the Franchise Directory, which had been phased out in 2023. Starting August 1, 2025, franchise brands must be listed in the directory for their franchisees to qualify for SBA loans. The move comes in response to rising default rates and documentation issues under the previous, more relaxed regime.
Getting listed isn’t automatic, brands need to submit a current Franchise Disclosure Document (FDD), their franchise agreement, and a signed Franchisor Certification. If a brand misses the July 31 deadline, it risks being removed from the directory, cutting off SBA loan access for prospective franchisees until reapplication and approval.
2. Lenders Are Under More Scrutiny
Previously, preferred lenders could lean on the SBA to determine if a brand met franchise eligibility standards. Not anymore. Under the new SOPs, lenders must independently verify a brand’s status in the Franchise Directory and ensure all supporting documentation complies with SBA requirements.
This added responsibility introduces more complexity into the loan process—and increases the need for well-organized, SBA-compliant documentation from franchisors.
3. Higher Bar for Loan Approval
The SBA is raising the bar on what business models qualify for financing. High-risk models like ghost kitchens and shared office spaces may be excluded unless they meet narrow operational criteria. Conversely, personal service franchises such as barbershops and salons remain eligible, even when they rely on independent contractors.
In addition, all startups and full ownership transfers will now require a 10% cash investment, and lenders must document why SBA financing is needed (for example, lack of conventional loan eligibility due to low collateral or long repayment timelines).
4. New Certification Requirements
Even brands already listed in the Franchise Directory must submit a new Franchisor Certification to maintain eligibility after July 31, 2025. This legal document outlines seven compliance conditions and signals that the brand agrees to operate in line with SBA lending expectations, even if those terms are not explicitly included in their franchise agreements.
Failing to submit the certification means removal from the directory and a halt on SBA-backed loan access until reinstatement.
5. What Franchisors Should Do Now
The bottom line? The SBA is signaling support for the franchise model, but only for those willing to operate with more structure, transparency, and oversight.
Franchisors should act now to:
Submit the Franchisor Certification and required documents ahead of the deadline
Ensure their operational model aligns with new eligibility standards
Work with experienced lenders who understand the franchise lending process
Create clear, lender-ready business plans to streamline approvals
For both franchisors and franchisees, now is the time to tighten documentation, clarify ownership structures, and revisit financial strategies. These changes may make capital access more competitive, but they also reward the brands that are best prepared to meet the moment.
Need help navigating the shift? Our team works with franchises of all sizes to develop SBA-compliant business plans that reflect the latest regulatory changes. In a tighter lending environment, clarity isn’t just helpful, it’s essential.
Let us help you build a lender-ready, SBA-compliant business plan that sets your franchise up for success in 2025 and beyond.
