; (II) the earnings or cash flow of the applicant; and (III) any equity or collateral of the applicant. . 204. Affiliation and franchise directory (a) Affiliation principles (1) Business loans Section 7(a)(1) of the Small Business Act ( 15 U.S.C. 636(a)(1) ), as amended by section 203(a) of this Act, is amended by adding at the end the following: (E) Affiliation principles Affiliation under any of the circumstances described below is sufficient to establish affiliation for applicants for a loan guaranteed under this subsection: (i) Affiliation based on ownership (I) In general For determining affiliation based on equity ownership, a concern is an affiliate of an individual, concern, or entity that owns or has the power to control more than 50 percent of the voting equity of the concern. (II) Other officers If no individual, concern, or entity is found to control a concern under subclause (I), the Administrator shall deem the board of directors, president, or chief executive officer (or other officers, managing members, or partners who control the management of the concern) to be in control of the concern. (III) Minority shareholder The Administrator shall deem a minority shareholder of a concern to be in control of the concern if that individual or entity has the ability, under the charter, by-laws, or shareholder agreement of the concern, to prevent a quorum or otherwise block action by the board of directors or shareholders of the concern. (ii) Affiliation arising under stock options, convertible securities, and agreements to merge (I) In general In determining the size of a concern, the Administrator shall— (aa) consider stock options, convertible securities, and agreements to merge (including agreements in principle) to have a present effect on the power to control a concern