I 

113TH CONGRESS 

2D SESSION H. R. 5600 

To amend the Small Business Act to establish rules for franchisee eligibility 

for financial assistance under certain small business programs. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 18, 2014 

Mr. GRAVES of Missouri introduced the following bill; which was referred to 

the Committee on Small Business 

A BILL 

To amend the Small Business Act to establish rules for 

franchisee eligibility for financial assistance under certain 

small business programs. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Franchise Financing 

5 Improvement Act of 2014’’. 

6 SEC. 2. ELIGIBILITY FOR FINANCIAL ASSISTANCE. 

7 Section 2 of the Small Business Act (15 U.S.C. 631) 

8 is amended by adding at the end the following new sub9 section: 


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1 ‘‘(k) The Administrator shall make financial assist2 ance available to franchisees under this Act or titles III 

3 and V of the Small Business Investment Act of 1958 if 

4 the franchisee is not affiliated with the franchisor pursu5 ant to section 3 of this Act.’’. 

6 SEC. 3. AFFILIATION RULES FOR FRANCHISEES. 

7 Section 3(a)(5) of the Small Business Act (15 U.S.C. 

8 632(a)(5)) is amended by adding at the end the following 

9 new subparagraphs: 

10 ‘‘(C) ELIGIBILITY OF FRANCHISEES.—For 

11 purposes of determining eligibility of 

12 franchisees for financial assistance under this 

13 Act or titles III and V of the Small Business 

14 Act, a franchisee shall not be considered affili15 ated with the franchisor if— 

16 ‘‘(i) the franchisor has filed a disclo17 sure document pursuant to— 

18 ‘‘(I) part 436 of title 16, Code of 

19 Federal Regulations (or any successor 

20 regulation); or 

21 ‘‘(II) any law or regulation of a 

22 State or territory that mandates dis23 closure of information to a franchisee; 

24 and 


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1 ‘‘(ii) the franchisee, upon default on a 

2 loan (whether guaranteed by the Adminis3 trator or not) has no ability to obtain fi4 nancial assistance from the franchisor to 

5 repay such loan. For purposes of this 

6 clause, a franchisor’s authority to repur7 chase the franchise for failure to comply 

8 with the terms and conditions of the fran9 chise agreement or have the right of first 

10 refusal to purchase the franchise from the 

11 franchisee shall not be considered financial 

12 assistance to repay loans issued to the 

13 franchisee. 

14 ‘‘(D) DEFINITIONS.—For the purposes of 

15 subparagraph (C), the terms ‘franchisor’ and 

16 ‘franchisee’ have the meaning given those terms 

17 in section 436.1 of title 16, Code of Federal 

18 Regulations as of January 1, 2014, or any suc19 cessor regulation.’’. 

20 SEC. 4. ISSUANCE OF REGULATIONS. 

21 (a) The Administrator, after the opportunity for no22 tice and comment, shall issue regulations to implement 

23 this Act within 120 days of enactment. 

24 (b) If the Administrator fails to promulgate such reg25 ulations, the Administrator shall, unless there is clear and 


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1 convincing evidence of fraud, honor the terms and condi2 tions of any guarantee issued by the Administrator pursu3 ant to the Small Business Act (15 U.S.C. 631 et seq.) 

4 or titles III and V of the Small Business Investment Act 

5 of 1958 (15 U.S.C. 661 et seq.) without regard to whether 

6 the entity complied with any Standard Operating Proce7 dure issued by the Administrator until such time as the 

8 Administrator issues regulations under subsection (a). 

9 (c) For purposes of subsection (b), the term ‘‘Stand10 ard Operating Procedure’’ shall have the meaning given 

11 the term ‘‘SOPs’’ in section 120.10 of title 13, Code of 

12 Federal Regulations as in effect on January 1, 2014, or 

13 any successor regulation. 

Æ 


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