What’s an affiliate?
Like small businesses, the SBA has a specific definition of what an affiliate is. Generally, it’s any business that has control over another business. This can include the following types of relationships:
- Stock ownership. When your company owns the largest share of stock in another company.
- Stock options or convertible securities. When your company has the option to buy controlling stocks or securities in another company.
- Merger agreements. When your company has a written merger agreement with another business.
- Common management. When your business’s officers, directors, partners or other employees have management positions in another company — this includes the people listed in section 9a.
- Connections to new businesses. When your business’s former employees or managers start a new company in your same industry and maintain a relationship with you.
- Subcontractors. When your company regularly relies on another business to fill contracts.
- Economic dependence. When your company wouldn’t be able to survive without the existence of another company.
However, the definition of an affiliate can get tricky. You might want to hire an expert or consult with your lender to make sure you’re including all required businesses.