SBA affiliation rule

The SBA rule that counts a business together with its affiliates, the companies under common control or ownership, when testing whether it is small enough to qualify for a 7(a) loan.

A buyer who already controls other businesses can push a target over the size standard and out of 7(a) eligibility without realizing it; the rule reaches through management control and ownership, not just equity percentages, so a searcher with a portfolio checks affiliation before assuming a deal is financeable.

In numbers: A searcher whose other company already employs 400 people buys a 150-employee target; counted together the 550 employees exceed a 500-person size standard, and the $4M 7(a) the deal was built on evaporates.