# Can a master franchisee or area developer get an SBA loan?

**Short answer:** A master franchisee cannot. Its income comes from royalties on units others operate, which SBA treats as passive. A franchisee with area development rights to open units it owns can qualify if it and its affiliates are small. Source: SOP 50 10 8.1, Sec. A, Ch. 1, Para. G.

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Last checked: 2026-11-08

It depends on who will own the units. SOP 50 10 8.1, Sec. A, Ch. 1, Para. G separates two deals that sound alike.

## Franchise Development Agreement

A Franchise Development Agreement, also called a Master Franchise Agreement, gives the developer a territory. Other franchisees own and operate the units, and the developer earns royalties from them. SBA has determined these agreements are passive. An applicant operating under one is not eligible.

## Area development rights

A franchise agreement can instead give you the right to develop more units that you or your affiliates own and operate in a territory. The SOP also calls this a Multi-Unit Franchise Agreement. You may be eligible, as long as you and your affiliate units are small.

## If an affiliate holds the master rights

A franchisee may still qualify if an affiliate operates under an ineligible Franchise Development Agreement. The applicant and its affiliates must be small, and no proceeds can benefit the ineligible affiliate.

## Franchisors

A franchisor can apply too. Its brand must be on the Directory, even if it will not sign a franchise agreement in the deal. The franchisor must meet size standards on its own, without combining its franchisees.

## Size and affiliates

Units you own more than 50% of in the same 3-digit NAICS subsector are affiliates under 13 CFR § 121.301(f).

## Sources

- [SOP 50 10 8.1, Sec. A, Ch. 1, Para. G (about p. 35)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [13 CFR § 121.301(f)](https://www.ecfr.gov/current/title-13/section-121.301)