SBA affiliation rule

Definition

The SBA rule counting businesses under common control as one.

Why It Matters

A buyer who already controls other businesses can push a target over the size limit without realizing it, because the SBA adds up every business under common control before deciding whether a deal qualifies. Control counts, not just how much stock you hold: running a company can be enough. A searcher who owns other things should check this rule before assuming a deal can be financed.

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.