---
kind: "section"
citation: "13 C.F.R. § 120.110"
title: "13"
number: "120.110"
heading: "What businesses are ineligible for SBA business loans?"
url: "https://uscodex.org/cfr/13/120.110"
---

# §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](/cfr/13/120.111.md));
- (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).**

## Notes

### 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]