Which businesses are ineligible for an SBA loan?

How to read the list

Section 120.110 is a flat list. If a business falls in one of the listed categories, it is ineligible for SBA business loans under this section, with the exceptions printed in the list itself. The lettering skips items (k) and (l), which are marked reserved; no meaning attaches to the gap. The tool above lets you tick the categories that describe you or your business and prints the matching items. It is a reading aid, not a decision; SBA and your lender determine eligibility, and the categories have edges that the text alone does not settle.

The categories with built-in exceptions

Several items carry parentheses that matter. Item (a) excludes non-profits but says for-profit subsidiaries are eligible, so a non-profit that runs a for-profit subsidiary is not shut out entirely. Item (b) excludes financial businesses primarily engaged in lending such as banks, finance companies and factors, but adds that pawn shops, though engaged in lending, may qualify in some circumstances. Item (c) excludes passive businesses owned by developers and landlords that do not actively use or occupy the assets financed, "except Eligible Passive Companies under § 120.111," which is how a real estate holding company that leases to an operating business can qualify; see our passive company page. Item (e) excludes businesses located in a foreign country but adds "businesses in the U.S. owned by aliens may qualify." Item (j) excludes government-owned entities, except businesses owned or controlled by a Native American tribe.

Revenue and activity tests

Two items turn on how much of the business is in a prohibited activity. Item (g) excludes businesses deriving more than one-third of gross annual revenue from legal gambling activities. A business at exactly one-third is not "more than" one-third. Item (m) applies the same one-third idea to loan packagers: those earning more than one-third of gross annual revenue from packaging SBA loans are ineligible. Item (p) is the strictest on revenue: a business that derives "directly or indirectly more than de minimis gross revenue" from products, services, or depictions of a prurient sexual nature is ineligible, as is any business that presents live performances of that kind. The regulation does not define "de minimis," so a lender will look to SBA's procedures for that.

People and relationships: items (n), (o) and (q)

Three items depend on who is involved. Item (n) excludes a business with an Associate who is currently incarcerated, serving a sentence imposed on a finding of guilt, or under indictment for a felony or any crime involving or relating to financial misconduct or a false statement. Item (o) excludes businesses in which the Lender or CDC, or any of its Associates, owns an equity interest, a conflict-of-interest protection. Item (q) is the one that surprises people. Unless SBA waives it for good cause, a business is ineligible if it previously defaulted on a federal loan or federally assisted financing and the government sustained a loss, and the bar also reaches businesses owned or controlled by an applicant or Associates who previously owned, operated or controlled a business that defaulted, or who guaranteed a defaulted loan, and caused a federal loss. The text adds that a compromise agreement counts as a loss. The word "Associate" is a defined term that 120.110 does not define, and the definition is found elsewhere in SBA regulations.

Other categories

The remaining items are plainly stated. Life insurance companies (d), pyramid sale distribution plans (f), businesses engaged in any activity illegal under federal, state or local law (h), private clubs and businesses that limit memberships for reasons other than capacity (i), businesses primarily engaged in political or lobbying activities (r), and speculative businesses such as oil wildcatting (s). Note that "illegal under federal, state or local law" includes activities lawful in one place but not another; the regulation says illegal under any of the three, and applying that to a particular business is a conversation with a lender.

What the list does not say

Not being on the list does not make you eligible. Section 120.110 is one test among several: the business must also meet the size rules in part 121 (see our size standards lookup), must meet the credit elsewhere test, and must plan an eligible use of proceeds. The list also does not say how SBA treats a business with several lines of activity when only a part falls in a listed category, beyond the revenue thresholds in (g), (m) and (p). The text is as printed in the eCFR at its October 29, 2026 issue date; the section was most recently amended at 89 FR 34101 (April 30, 2024).

Sources

• 13 CFR § 120.110, What businesses are ineligible for SBA business loans?. Read November 2, 2026.
• 13 CFR § 120.111, What conditions must an Eligible Passive Company satisfy?. Read November 2, 2026.

Text read: Electronic Code of Federal Regulations, Title 13, Part 120, current through the eCFR issue date of October 29, 2026. Dollar figures and percentages on this page are the ones printed in those sections as of that date; SBA can amend the rule and publishes loan-program procedures (such as SOP 50 10) that add detail this page does not cover. Confirm current terms with an SBA-approved lender or at sba.gov. This page summarizes the regulation and does not replace it.