Businesses cannot be engaged in illegal activities, loan packaging, speculation, multi sales distribution, gambling, investment or lending, or where the owner is on parole.
Specific types of businesses not eligible include:
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Real Estate Investment and Other Speculative Activities
Real estate investment firms exist when the real property will be held for investment purposes - as opposed to loans to otherwise eligible small business concerns for the purpose of occupying the real estate being acquired.
Other speculative activities are those firms developing profits from fluctuations in price rather than through the normal course of trade, such as wildcatting for oil and dealing in commodities futures, when not part of the regular activities of the business. Dealers of rare coins and stamps are not eligible.
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Lending Activities
Lending activities include banks, finance companies, factors, leasing companies, insurance companies (not agents), and any other firm whose stock in trade is money.
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Pyramid Sales Plans
Pyramid sales plans are characterized by endless chains of distributors and sub-distributors where a participant's primary incentive is based on the sales made by an ever-increasing number of participants. Such products as cosmetics, household goods, and other soft goods lend themselves to this type of business.
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Illegal Activities
Illegal activities are by definition those activities which are against the law in the jurisdiction where the business is located. Included in these activities are the production, servicing, or distribution of otherwise legal products that are to be used in connection with an illegal activity, such as selling drug paraphernalia or operating a motel that permits illegal prostitution.
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Gambling Activities
Gambling activities include any business whose principal activity is gambling. While this precludes loans to race tracks, casinos, and similar enterprises, the rule does not restrict loans to otherwise eligible businesses, which obtain less than one-third of their annual gross income from either: 1) the sale of official state lottery tickets under a state license, or 2) legal gambling activities licensed and supervised by a state authority.
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Charitable, Religious, or Certain Other Nonprofit Institutions
Charitable, religious, or other nonprofit institutions, government-owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives are not eligible.
Information courtesy of the Small Business Administration.
