SBA Ineligible Businesses: The 13 CFR 120.110 List With Its SOP 50 10 8.1 Conditions
13 CFR 120.110 lists the businesses not eligible for SBA business loans, including 7(a) and 504 loans, but states a percentage for only two: gambling and loan packaging, both at one-third of gross annual revenue. The other thresholds here come from SOP 50 10 8.1, effective 1 October 2026: a pawn shop needs more than 50 percent of prior-year revenue from merchandise and a hotel more than 50 percent from stays of 30 days or less, while over 50 percent from lobbying, more than 5 percent from prurient content, or any marijuana activity makes a business ineligible. Three categories often still listed, religious organizations, cooperatives and owners on parole or probation, are no longer in the regulation.
This is general information, not legal or lending advice, and we are not a lender, a CDC or attorneys. SOP 50 10 8.1 governs applications SBA receives on or after 1 October 2026. Your SBA lender, and SBA itself on non-delegated applications, decides eligibility. Confirm your position with the lender before you spend money on an application.
What businesses are not eligible for SBA loans?
Seventeen categories, in paragraphs (a) to (s) of 13 CFR 120.110, with (k) and (l) reserved. Under SOP 50 10 8.1 some "may be eligible under limited circumstances". Quoted text is the regulation; the third column summarizes the main SOP conditions, not all of them.
| Paragraph | 13 CFR 120.110 says | SOP 50 10 8.1 condition |
|---|---|---|
| (a) | "Non-profit businesses (for-profit subsidiaries are eligible)" | Same test. |
| (b) | "Financial businesses primarily engaged in the business of lending"; pawn shops may qualify | Eligible: pawn shops with more than 50 percent of prior-year revenue from merchandise; sales financing under 50 percent of revenue; check cashing over 50 percent. Not eligible: investment and bail bond companies. |
| (c) | "Passive businesses owned by developers and landlords" not actively using the assets; Eligible Passive Companies excepted | Not eligible: landlords, apartments, mobile home parks; land leased for towers, solar panels, billboards or turbines; EV-charging stations and stand-alone passive assets; salon suites and ghost kitchens unless a membership model; leveled models without ownership of the contracts; management agreements giving sole discretion. Eligible on conditions: hotels, motels, RV parks, marinas, campgrounds; licensed nursing homes; professional-license businesses. |
| (d) | "Life insurance companies" | Carriers, not independent agents. |
| (e) | "Businesses located in a foreign country (businesses in the U.S. owned by aliens may qualify)" | Paragraph F adds: every owner a U.S. citizen or U.S. national whose principal residence is in the United States. No green card holders. |
| (f) | "Pyramid sale distribution plans" | Adds multilevel plans. |
| (g) | "Businesses deriving more than one-third of gross annual revenue from legal gambling activities" | Prior-year revenue, including rental income. If the purpose of the business is gambling (racetrack, casino, skill games such as video poker), out at any percentage. |
| (h) | "Businesses engaged in any activity that is illegal under Federal, State, or local law" | Marijuana out at any amount, even where state-legal. Hemp only if federal and state definitions are met; the federal one changes on 12 November 2026. CBD on factors that include four the SOP names. |
| (i) | "Private clubs and businesses which limit the number of memberships for reasons other than capacity" | Single-gender health clubs out; a gym marketed to one gender may be eligible if both may join. Discriminatory hiring out (the SOP cites 13 CFR 113.3). |
| (j) | "Government-owned entities", except tribe-owned or controlled businesses | A tribe itself and municipal businesses out. A tribe-owned separate legal entity may be eligible, on conditions. |
| (k) to (l) | Reserved | Religious organizations left (k) on 1 August 2022; cooperatives left (l) on 20 September 2017. |
| (m) | "Loan packagers earning more than one third of their gross annual revenue from packaging SBA loans" | Adds Lender Service Providers. |
| (n) | "Businesses with an Associate who is currently incarcerated", serving a sentence, or under indictment for a felony or a financial-misconduct or false-statement crime | Parole or probation may be eligible, with a continuity plan if the business depends on that person. |
| (o) | "Businesses in which the Lender or CDC, or any of its Associates owns an equity interest" | Direct or indirect; the SOP's only exception is an SBIC Associate, under 13 CFR 120.104. |
| (p) | "Present live performances of a prurient sexual nature" or "more than de minimis gross revenue" from prurient products, services or displays | Live or recorded. De minimis is 5 percent of gross revenue. |
| (q) | Unless waived, "businesses that have previously defaulted on a Federal loan or Federally assisted financing" causing a federal loss; "a compromise agreement shall also be considered a loss" | Unpaid taxes are not a “Loss”, though the SOP separately requires current taxes in both programs. CAIVRS check mandatory. A fully satisfied loss can proceed. Discretionary waiver for a non-controlling investor who held under 20 percent. |
| (r) | "Businesses primarily engaged in political or lobbying activities" | Over 50 percent of gross annual revenue. |
| (s) | "Speculative businesses (such as oil wildcatting)" | Includes dealing in stocks, bonds and commodity futures, research and development, and homes for future sale except under Builders CAPLines. |
Paragraph E adds bars from outside 13 CFR 120.110, including an existing 7(a) or 504 loan with a payment unpaid for more than 29 days, nontax federal debt unpaid 90 days after its due date, and a location in the Coastal Barrier Resource System (13 CFR 120.175). They sit in Section A, which covers 7(a) and 504 loans alike.
How much gambling, lodging or adult revenue makes a business ineligible for an SBA loan?
More than one-third from legal gambling; for a hotel, half or less from stays of 30 days or less; more than 5 percent from prurient content. Worked examples, every figure assumed.
A bar with gaming terminals. Prior-year gross revenue of $1,200,000 puts the one-third line at $400,000. If $410,000 came from state-licensed video gaming terminals, that is 34.2 percent and the business is not eligible. At $390,000 it is 32.5 percent and clears the one-third test, where the SOP says only that such businesses "may be eligible". No percentage helps if the purpose of the business is gambling, a test that since SOP 50 10 8.1 names "skill games (e.g. video poker)".
| Test | Revenue tested | Result |
|---|---|---|
| Hotel, more than 50 percent from stays of 30 days or less | $900,000, prior year | $460,000 (51.1 percent) meets this test; $450,000 (50.0 percent) does not |
| Prurient content, more than 5 percent | $2,000,000, gross revenue | $110,000 (5.5 percent) not eligible; $100,000 (5.0 percent) is not over the line |
For a Start-Up Business the SOP tests a hotel's projections instead, so the revenue model in your hotel business plan is the evidence. The prior-loss waiver, in force since 1 June 2026, requires that the owner "Held less than 20 percent of the equity of the business with the prior loss", with no guarantee and no control. 19 percent meets that threshold and 20 percent does not; SBA then decides case by case, and only for a prior loss on a 7(a) or 504 loan.
Can a cannabis, hemp or CBD business get an SBA loan?
Marijuana, no, at any amount. Hemp, only if it meets the federal and state definitions, and the federal one changes on 12 November 2026. CBD is assessed on factors that include four the SOP names.
Ineligible is "a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity", medical or recreational, even where state law permits it, along with smoking devices "primarily intended or designed for marijuana use".
A hemp business "is eligible only if the hemp meets the definition in section 297A of the Agricultural Marketing Act of 1946 and any applicable state definition of hemp". Public Law 119-37, approved 12 November 2025, amends section 297A "Effective 365 days after the enactment of this Act", 12 November 2026 by our count. The test moves from delta-9 THC to "a total tetrahydrocannabinols concentration (including tetrahydrocannabinolic acid) of not more than 0.3 percent on a dry weight basis". Final hemp-derived cannabinoid products with more than "0.4 milligrams combined total per container" of THC and similar cannabinoids are excluded. Public Law 119-103 limits the amendment "Until December 11, 2026" to products containing cannabinoids the plant cannot naturally produce. SOP 50 10 8.1 does not mention the change. Ask your lender which definition it will test.
For CBD the SOP names four factors, in a list that is not closed: the source, hemp or marijuana; the product type; health claims; and compliance with federal, state and local law including FDA rules. The lender must obtain documentation that products comply, "including necessary certificates of lab analysis".
Is a landlord, salon suite, ghost kitchen or managed business a passive business?
A landlord, yes, and ineligible unless it is an Eligible Passive Company under 13 CFR 120.111 (the owner occupancy tests are a separate rule). A salon suite or ghost kitchen, yes unless three conditions are met. A managed business, yes where the manager has sole discretion. "Businesses that are primarily engaged in owning or purchasing real estate and leasing it for any purpose are not eligible."
Salon suites, ghost kitchens and similar space-rental models are out unless revenue "is earned through membership dues (not rent)", customers have no assigned space, and the business maintains the space and supplies the equipment. For these models, "A business is either fully eligible or fully ineligible." A combined model, "part of the revenue is from rent and part from membership dues", is not eligible.
A management agreement "that gives the management company sole discretion over the business operations" makes the business passive. It stays eligible if the manager lacks sole discretion and you keep meaningful oversight of the annual budget, large expenses, the bank accounts and the employees, who must be yours.
Among the additions in SOP 50 10 8.1: "EV-charging stations and businesses structured as a stand-alone asset operated on a passive basis are not eligible." Leveled models where the owner "relies on the services of a middle level operator (e.g., cleaning service models)" without owning the contracts are out, and professional-license businesses are eligible if the ownership structure meets all applicable state requirements.
Can a church, a cooperative or an owner on probation get an SBA loan?
None of the three is barred as such by 13 CFR 120.110 today, and each still has to meet every other requirement.
Religious organizations. Paragraph (k), which covered businesses "principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs", was removed and reserved effective 1 August 2022. Paragraph (a) still excludes non-profits.
Consumer and marketing cooperatives. A rule effective 20 September 2017 took them off the list: "SBA is removing consumer and marketing cooperatives from the ineligible types of businesses identified in this section and is reserving paragraph (l)". A cooperative must still "meet SBA’s eligibility requirements".
Owners on parole or probation. A rule "effective May 30, 2024" removed probation and parole from paragraph (n). The SOP says a business owned by someone on parole or probation "may be eligible", with a continuity plan if it depends on that person.
Can a green card holder own a business with an SBA loan?
Not under SOP 50 10 8.1: every owner must be a U.S. citizen or U.S. national. The regulation's wording is looser; paragraph (e) reads "businesses in the U.S. owned by aliens may qualify". Paragraph F of the SOP adds:
SBA financing is limited to business Applicants with 100% direct and/or indirect owners and SBA-required guarantors, all of whom must be U.S. Citizens or U.S. Nationals who have their Principal Residence in the United States, its territories, or possessions.
Appendix 3's Ineligible Persons include green card holders, visa holders, asylees, refugees, DACA recipients, citizens of the People's Republic of China or Hong Kong, anyone whose principal residence is abroad, and entities formed outside the United States. The cure is divestment: "If a direct or indirect owner is an Ineligible Person, the business is ineligible unless the Ineligible Person completely divests their ownership prior to the date of issuance of the SBA loan number."
Policy Notice 5000-876441 and Procedural Notice 5000-876626 made the change effective 1 March 2026. On 1 July 2026 GAO decided in B-338157 that the two notices are a rule under the Congressional Review Act and that "SBA did not submit a CRA report to Congress or to the Comptroller General on the 2026 Notices". Disapproval resolutions were introduced in both chambers on 23 July 2026. SOP 50 10 8.1 carries the 100 percent rule; ask your lender and counsel.
What does your business plan have to show?
The plan is where you put the evidence in front of the lender. For a business near any line:
- Prior-year revenue by source, reconciled to the tax return; a start-up hotel shows projected revenue by length of stay.
- An ownership table to 100 percent, direct and indirect, with citizenship, principal residence, where each entity was formed, and changes in the last six months.
- Hemp or CBD documentation: the definitions met, product types, health claims, lab certificates and testing protocols.
- A continuity plan if the business depends on an owner on parole or probation.
- Every prior federal loan by any owner or Associate, disclosed before the lender's mandatory CAIVRS check.
We build SBA loan business plans to that structure; a separate page explains when the SOP requires a business plan. Fixed fees: $1,000 Essential, $1,800 Standard and $2,500 Premium. We never charge a percentage of anything you borrow, invest or raise. If your figures put the business near one of these lines, we will point to the paragraph before you pay us, and your lender still decides.
Business Plan Firm is the US practice of Avvale, a London consultancy. We have written 1,000+ plans for 500+ founders across 30+ countries, and our clients have raised $500M+.
How we verified this
Every quotation was checked against raw source text on 10 October 2026.
- 13 CFR 120.110: the govinfo.gov annual edition revised as of 1 January 2025, matching the Legal Information Institute text; we found no later Federal Register rule amending the section. Also 13 CFR 113.3, 120.104, 120.111 and 120.175.
- SOP 50 10 8.1, effective 1 October 2026: Section A, Chapter 1, Paragraphs E and F; Section A, Chapter 2, Paragraph C; Section B, Chapter 6; Section C, Chapter 1; and Appendix 3, from the current sba.gov file (SBA's page dates it 7 October 2026), compared with the 1 June 2025 edition.
- Federal Register: 82 FR 39491 (21 August 2017), paragraph (l); 87 FR 38900 (30 June 2022), paragraph (k); 89 FR 34094 (30 April 2024), paragraph (n).
- Hemp: Public Law 119-37, division B, section 781; Public Law 119-103, section 2019; and the current 7 U.S.C. 1639o.
- SBA notices: Policy Notice 5000-876441 and Procedural Notice 5000-876626 (citizenship), Policy Notice 5000-879464 (prior-loss waiver) and Information Notice 5000-882227 (applications the SOP governs).
- GAO decision B-338157 (1 July 2026), from an Internet Archive capture of the gao.gov PDF, and the introduced texts of S.J. Res. 202 and H.J. Res. 207.
Not verified, so not on this page: how SBA or any lender will apply the amended hemp definition; whether Congress has changed those dates since 2 September 2026; whether SBA has submitted the citizenship notices to Congress or either resolution has moved; and how lenders apply the rental income wording in the gambling test.
Frequently asked questions
Can a landlord or real estate investor get an SBA loan?
Not if the business is passive, unless it is an Eligible Passive Company under 13 CFR 120.111. 13 CFR 120.110(c) excludes other passive businesses owned by developers and landlords from SBA business loans, and SOP 50 10 8.1 says businesses primarily engaged in owning or purchasing real estate and leasing it are not eligible.
Can a hemp business get an SBA loan?
A hemp business is eligible only if the hemp meets the federal definition in section 297A of the Agricultural Marketing Act of 1946 and any state definition, under SOP 50 10 8.1. Public Law 119-37 changes it from 12 November 2026, mostly held back until 11 December 2026: total THC including THCA of not more than 0.3 percent, and no final product above 0.4 milligrams per container.
Can a bar with video gaming terminals get an SBA loan?
A bar may be eligible only if legal gambling produced one-third or less of its prior-year gross revenue, including rental income, and gambling is not the purpose of the business, under 13 CFR 120.110(g) and SOP 50 10 8.1.
Can a nonprofit or a church get an SBA loan?
A nonprofit, no: paragraph (a) of 13 CFR 120.110 makes non-profit businesses ineligible, though for-profit subsidiaries are eligible. A religious organization is no longer excluded as such, because paragraph (k) was removed effective 1 August 2022, but paragraph (a) still applies.
Does every owner have to be a U.S. citizen to get an SBA loan?
A U.S. citizen or U.S. national, under SOP 50 10 8.1. Paragraph F limits SBA financing to Applicants whose direct and indirect owners are all U.S. citizens or U.S. nationals with their principal residence in the United States. A green card holder must divest first.
This page summarizes 13 CFR 120.110 and SOP 50 10 8.1 as retrieved 10 October 2026. It is general information, not legal, lending or tax advice, and no professional relationship arises from reading it. Your SBA lender and SBA decide eligibility on your facts, and SBA policy changes. Confirm current requirements with a lender and, where ownership or legal status is in question, with qualified counsel.