§120.110. What businesses are ineligible for SBA business loans?
13 C.F.R. § 120.110
The following types of businesses are ineligible:
Non-profit businesses (for-profit subsidiaries are eligible);
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);
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);
Life insurance companies;
Businesses located in a foreign country (businesses in the U.S. owned by aliens may qualify);
Pyramid sale distribution plans;
Businesses deriving more than one-third of gross annual revenue from legal gambling activities;
Businesses engaged in any activity that is illegal under Federal, State, or local law;
Private clubs and businesses which limit the number of memberships for reasons other than capacity;
Government-owned entities (except for businesses owned or controlled by a Native American tribe);
- (l) [Reserved]
Loan packagers earning more than one third of their gross annual revenue from packaging SBA loans;
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;
Businesses in which the Lender or CDC, or any of its Associates owns an equity interest;
Businesses which—
Present live performances of a prurient sexual nature; or
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;
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;
Businesses primarily engaged in political or lobbying activities; and
Speculative businesses (such as oil wildcatting).
Notes, amendments, and revision history
Amendments
[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]
Authority
Authority: 15 U.S.C. 634(b) (6), (b) (7), (b) (14), (h), and note, 636(a), (h) and (m), 650, 687(f), 696(3) and (7), and 697(a) and (e); sec. 521, Pub. L. 114-113, 129 Stat. 2242; sec. 328(a), Pub. L. 116-260, 134 Stat. 1182.
Source
Source: 61 FR 3235, Jan. 31, 1996, unless otherwise noted.
Amendments
[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]