{"ok":true,"canonical_url":"https://dealroom.so/glossary/multi-level-marketing-scheme","api_url":"https://dealroom.so/api/public/glossary/multi-level-marketing-scheme","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"multi-level-marketing-scheme","term":"Multi-level marketing scheme","group":"The loan itself","definition":"This is a business model where participants earn money from both direct sales and recruiting new distributors. It's an ineligible business type for SBA loans because it often resembles a pyramid scheme and lacks a sustainable primary revenue source.","what_it_means":"The SBA specifically prohibits financing businesses that are primarily engaged in multi-level marketing. If the business you're looking at relies heavily on recruitment and a complex compensation structure, it will not qualify for an SBA 7(a) loan. This is a deal-breaker.","url":"https://dealroom.so/glossary/multi-level-marketing-scheme","official_sources":[{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"},{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"ineligible-business-type","term":"Ineligible business type","url":"https://dealroom.so/glossary/ineligible-business-type"},{"slug":"pyramid-scheme","term":"Pyramid Scheme","url":"https://dealroom.so/glossary/pyramid-scheme"},{"slug":"ineligible-businesses-rule","term":"Ineligible businesses rule","url":"https://dealroom.so/glossary/ineligible-businesses-rule"},{"slug":"sba-7-a-loan-program","term":"SBA 7(a) Loan Program","url":"https://dealroom.so/glossary/sba-7-a-loan-program"}],"related_questions":[{"question":"How does the SBA evaluate the eligibility of an applicant business involved in multi-level marketing or pyramid sales schemes?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-evaluate-the-eligibility-of-an-applicant-business-involved-in-multi-level"},{"question":"Can a business engaged in multi-level marketing (MLM) be eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-business-engaged-in-multi-level-marketing-mlm-be-eligible-for-a-7-a-loan"},{"question":"Is it necessary to obtain separate life insurance policies for each owner in a multi-owner business?","url":"https://dealroom.so/sba-7a/questions/is-it-necessary-to-obtain-separate-life-insurance-policies-for-each-owner-in-a-multi-owner"},{"question":"What level of environmental due diligence is required for leasehold improvements only, without real estate acquisition?","url":"https://dealroom.so/for-lenders/questions/what-level-of-environmental-due-diligence-is-required-for-leasehold-improvements-only-with"},{"question":"Are marketing and advertising expenses allowed uses for 7(a) loan funds?","url":"https://dealroom.so/sba-loans/basics/are-marketing-and-advertising-expenses-allowed-uses-for-7-a-loan-funds"},{"question":"What level of debt service coverage ratio (DSCR) does an SBA 7(a) lender typically look for?","url":"https://dealroom.so/sba-7a/questions/what-level-of-debt-service-coverage-ratio-dscr-does-an-sba-7-a-lender-typically-look-for"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Multi-level marketing scheme","url":"https://dealroom.so/glossary/multi-level-marketing-scheme","source_type":"DealRoom Data"}}