Section 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);(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 82 FR 39502, 9/20/2017; 87 FR 38908, 8/1/2022; 89 FR 34101, 5/30/2024