Does your company qualify for a government-backed U.S. Small Business Administration loan? Here are the loan eligibility requirements, according to the SBA.

SBA Loan Eligibility

Despite the fact that most businesses qualify for financial assistance from the SBA, some do not.

Eligible Business Types Must Be:

  • An operating business or a start-up operating business
  • Organized for profit
    • Not for profits businesses are not eligible for SBA loan programs
    • For profit subsidiaries of non-profits may be eligible (discuss with your loan officer for more information)
  • Located in the United States
  • Small under SBA Size Standard requirements (this was addressed in the affiliates sections)
  • Able to demonstrate the need for the desired credit with a SBA guarantee (Credit Not Available Elsewhere Rule)

Ineligible Business Types:

  • Non-Profits (See above regarding for profit subsidiaries)
  • Businesses engaged in lending, some examples are banks, life insurance companies, bail bonds, etc.
  • Passive businesses, this typically involved real estate ownership or development where the owner is not the end user and/or collects rent. This may also include owners that have a management company run all of the business operations. Discuss with your loan officer if this is your plan.
  • Life Insurance companies are not eligible; however, an insurance agent may be eligible depending on the use of proceeds
  • Businesses Located in a Foreign Country or Owned in whole or in part by undocumented (illegal) aliens
  • Businesses selling through a pyramid plan or multi-level sales plan
    • Watch for this when looking at some franchise agreements and documents
  • Businesses engaged in legal gambling activities
  • Businesses Engaged in any Illegal Activities
  • Marijuana-Related Businesses – both direct and indirect (NOTE: Hemp and CBD type companies may be eligible, see SOP 50 10 for details)
    • Indirect means a business that derived any of its gross revenue for the previous year (or, if a start-up business, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to aid in the use, growth, enhancement or other development of marijuana.
    • Examples of Indirect Marijuana Businesses include businesses that provide testing services, or sell or install grow lights, hydroponic or other specialized equipment, to one or more Direct Marijuana Businesses
  • Businesses That Restrict Patronage or Have Discriminatory Hiring Practices
  • Government-Owned Entities, Excluding Native American Tribes
  • Loan Proceeds for Religious Activity
  • Businesses Engaged in SBA Loan Packaging
  • Equity Interest by SBA Lender or Associates in Applicant Concern
  • Businesses Providing Prurient Sexual Material
  • Businesses primarily engaged in political or lobbying activities
  • Speculation – included in this class are businesses that are in the R&D stage and do not have a product or service to sell
  • Others as defined in the SOP 50 10