(4) The commercial interests that employees of companies that lease primarily in the leasing of employees to other companies or who enter into an agreement with a professional organisation of employers (PEO) are not linked to the leasing company or the PEO solely on the basis of a lease agreement. Where an applicant has an administrative arrangement and is considered an active business, no affiliation is entered into between the applicant and the management company if the management agreement includes meaningful monitoring of the management company`s activities. The SBA defines useful monitoring as an explicit power for the applicant, as stated in the administrative agreement, to assume at least the following: all SBA loan applicants and their associated businesses must be small if they are grouped into the SBA size requirements to participate in SBA credit programs. To determine if there is affiliation, SBA analyzes an applicant`s ownership, management and franchise, license or other agreements and relationships at the time of application. A type of affiliation can occur when an individual person, person or organization controls the management of the applicant company through an administrative arrangement. For lenders, membership rules are not always simple under SBA guidelines. However, the current version of SBA`s SoP provides lenders with new guidelines for determining whether a management agreement establishes a link between the management company and the applicant, so that the management company must be included in the applicant`s standard size analysis. 3. The control may be positive or negative.
Negative control includes negative, but not limited, control in cases where a minority shareholder is, under the charter, by statute or shareholders` pact, the possibility of otherwise preventing or blocking a quorum by the board of directors or shareholders. The SBA continues to update its guidelines for reviewing management agreements and determining the eligibility of franchise concepts used by management companies. When reviewing management agreements, lenders should ensure that eligibility is verified and correct membership distinctions are drawn. We will notify of any changes or future developments regarding management agreements as they become available. For more information on membership issues, please contact Jennifer at [email protected] or at 267-470-1206. Where an applicant has an administrative arrangement and the management company has the exclusive authority to manage its activities, including control of the company`s employees, finances and bank accounts, without the participation of the owners of the applicant business, the applicant is considered a passive business and is not eligible for SBA funding. If a management agreement meets the FTC definition of a franchised company and is not on the SBA franchise list, the applicant is not eligible for SBA funding. If a potential loan is an administrative arrangement, lenders processing loans under their delegated authority must: (i) receive a copy of the management agreement, (ii) perform a membership analysis in accordance with 13 C.F.R. 121.301 (f) (3) and (iii) keep a copy of the agreement and a detailed partnership analysis in the credit file.