What businesses are ineligible for SBA business loans?

Summary

Regulation section 120.110, What businesses are ineligible for SBA business loans, lists types of ineligible businesses. They include non-profit businesses (for-profit subsidiaries are eligible), financial businesses primarily engaged in the business of lending, life insurance companies, pyramid sale distribution plans, and businesses engaged in any activity that is illegal under Federal, State, or local law. It also lists businesses deriving more than one-third of gross annual revenue from legal gambling activities, and businesses with an Associate who is currently incarcerated or under indictment for a felony. The last paragraphs cover political or lobbying businesses and speculative businesses (such as oil wildcatting).

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§ 120.110 What businesses are ineligible for SBA business loans?

The following types of businesses are ineligible:

( a ) Non-profit businesses (for-profit subsidiaries are eligible);

( b ) Financial businesses primarily engaged in the business of lending, such as banks, finance companies, and factors (pawn shops, although engaged in lending, may qualify in some circumstances);

( c ) Passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds (except Eligible Passive Companies under § 120.111 );

( d ) Life insurance companies;

( e ) Businesses located in a foreign country (businesses in the U.S. owned by aliens may qualify);

( f ) Pyramid sale distribution plans;

( g ) Businesses deriving more than one-third of gross annual revenue from legal gambling activities;

( h ) Businesses engaged in any activity that is illegal under Federal, State, or local law;

( i ) Private clubs and businesses which limit the number of memberships for reasons other than capacity;

( j ) Government-owned entities (except for businesses owned or controlled by a Native American tribe);

( k ) - ( l ) [Reserved]

( m ) Loan packagers earning more than one third of their gross annual revenue from packaging SBA loans;

( n ) Businesses with an Associate who is currently incarcerated, serving a sentence of imprisonment imposed upon adjudication of guilty, or is under indictment for a felony or any crime involving or relating to financial misconduct or a false statement;

( o ) Businesses in which the Lender or CDC, or any of its Associates owns an equity interest;

( p ) Businesses which:

( 1 ) Present live performances of a prurient sexual nature; or

( 2 ) Derive directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature;

( q ) Unless waived by SBA for good cause, businesses that have previously defaulted on a Federal loan or Federally assisted financing, resulting in the Federal government or any of its agencies or Departments sustaining a loss in any of its programs, and businesses owned or controlled by an applicant or any of its Associates which previously owned, operated, or controlled a business which defaulted on a Federal loan (or guaranteed a loan which was defaulted) and caused the Federal government or any of its agencies or Departments to sustain a loss in any of its programs. For purposes of this section, a compromise agreement shall also be considered a loss;

( r ) Businesses primarily engaged in political or lobbying activities; and

( s ) Speculative businesses (such as oil wildcatting).

[ 61 FR 3235 , Jan. 31, 1996, as amended at 82 FR 39502 , Aug. 21, 2017; 87 FR 38908 , June 30, 2022; 89 FR 34101 , Apr. 30, 2024]

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