{"ok":true,"canonical_url":"https://dealroom.so/glossary/pyramid-scheme","api_url":"https://dealroom.so/api/public/glossary/pyramid-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":"pyramid-scheme","term":"Pyramid Scheme","group":"The loan itself","definition":"An illegal business model where participants profit primarily from recruiting new members, not from selling legitimate products or services. The SBA will not finance these businesses.","what_it_means":"The SBA strictly prohibits lending to businesses engaged in pyramid schemes. This falls under the ineligible businesses rule. Lenders will scrutinize the business model to ensure its revenue comes from genuine sales, not just recruitment fees, to protect against fraud and ensure legitimate use of federal funds.","url":"https://dealroom.so/glossary/pyramid-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"}],"related":[{"slug":"ineligible-businesses-rule","term":"Ineligible businesses rule","url":"https://dealroom.so/glossary/ineligible-businesses-rule"},{"slug":"multi-level-marketing-company","term":"Multi-Level Marketing Company","url":"https://dealroom.so/glossary/multi-level-marketing-company"},{"slug":"fraud","term":"Fraud","url":"https://dealroom.so/glossary/fraud"},{"slug":"business-plan","term":"Business plan","url":"https://dealroom.so/glossary/business-plan"}],"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"}]},"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 — Pyramid Scheme","url":"https://dealroom.so/glossary/pyramid-scheme","source_type":"DealRoom Data"}}