[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR120.110]

[Page 167-168]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 120--BUSINESS LOANS--Table of Contents
 
           Subpart A--Policies Applying to All Business Loans
 
Sec. 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 Sec. 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 illegal activity;
    (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) Businesses principally engaged in teaching, instructing, 
counseling or indoctrinating religion or religious beliefs, whether in a 
religious or secular setting;
    (l) Consumer and marketing cooperatives (producer cooperatives are 
eligible);
    (m) Loan packagers earning more than one third of their gross annual 
revenue from packaging SBA loans;
    (n) Businesses with an Associate who is incarcerated, on probation, 
on parole, or has been indicted for a felony or a crime of moral 
turpitude;
    (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

[[Page 168]]

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).