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SBA 504 Q&A: Credit: Affiliation Determination
Q: How does the Small Business Administration (SBA) determine affiliation for 504 loans?
A: Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both. It does not matter whether control is exercised, so long as the power to control exists.
The SBA considers factors such as ownership, management, previous relationships with or ties to another concern and contractual relationships in determining whether affiliation exists.
Control may be affirmative or negative. Negative control includes, but is not limited to, instances where a minority shareholder has the ability, under the concern’s charter, by-laws, or shareholder’s agreement, to prevent a quorum or otherwise block action by the board of directors or shareholders.
Affiliation may also be found where an individual, concern or entity exercises control indirectly through a third party.
If you have a question you’d like our SBA 504 loan experts to answer, email us at info@FloridaFirst.com or call 850.681.3601 or toll-free at 800.504.LOAN.