SBA franchise registry will cut red tape

The U.S. Small Business Administration announced March 3 that it has selected a private sector firm, FRANDATA Corporation of Washington, D.C., to help it create a central registry of franchise systems and franchise agreements that will significantly streamline small-business franchise loan eligibility decisions.

"We are excited about this step in the franchise registry project," said SBA Administrator Aida Alvarez in a news release. "The registry is a breakthrough effort to cut red tape, and we believe it will greatly speed up the approval process on franchise loans."

FRANDATA stated that the registry should be available on the Internet by early June, the release said.

Franchise agreements are the contracts between large companies that sell franchises and the small-business owners/operators who buy them. When reviewing a loan application from a franchisee, SBA determines whether the franchise agreement preserves the independent small business status of the franchisee and whether it protects SBA's interests as loan guarantor.

Currently, each time a franchisee or prospective franchisee applies for an SBA loan guaranty, attorneys in SBA field offices review the franchise agreement to determine eligibility.

Under the new process, the contractor will create and maintain a central registry of eligible franchises after a full review of franchise documents. SBA attorneys and loan officers will need only to consult the registry to find out whether the franchise agreement and the franchisor meet the SBA's requirements, the release said.