{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-if-a-business-seeking-a-7-a-loan-derives-a-significant-portion-of-its-revenue-from-se","api_url":"https://dealroom.so/api/public/questions/what-if-a-business-seeking-a-7-a-loan-derives-a-significant-portion-of-its-revenue-from-se","question":"What if a business seeking a 7(a) loan derives a significant portion of its revenue from selling products on consignment?","topic":"Eligibility determinations","audience":"lender","bot_mode":"lender","short_answer":"A business selling products on consignment is generally eligible for a 7(a) loan, provided it generates sufficient, stable revenue and profit from its operations, and meets other program requirements.","rule":"The SBA's eligibility criteria focus on the business's operational viability and adherence to small business principles. Selling on consignment is a common business model. The key for a lender is to ensure the business's financial statements accurately reflect revenue and costs associated with consignment sales, that the business has a consistent track record of profitability, and that it is not considered speculative or a passive business. The lender must assess the risk associated with not owning the inventory.","example":"A furniture store that sells 40% of its inventory on consignment applies for a 7(a) loan. The lender reviews the store's financial statements, confirming consistent revenue and profit margins from these sales, and ensures the consignment agreements are clear. The business is eligible.","what_lenders_check":"Lenders must understand the financial implications of consignment sales, particularly regarding inventory ownership, cost of goods sold, and potential returns. Due diligence should focus on the stability of supplier relationships, the terms of consignment agreements, and the overall profitability of this revenue stream.","required_facts":["Consignment revenue percentage","Business profitability","Operational stability","Inventory ownership","Consignment agreements"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"Can a trust or an estate be an eligible borrower for an SBA 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-trust-or-an-estate-be-an-eligible-borrower-for-an-sba-7-a-loan"},{"question":"What constitutes \"passive income\" disqualifying a business from 7(a) loan eligibility?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-passive-income-disqualifying-a-business-from-7-a-loan-eligibility"},{"question":"Are businesses that primarily derive revenue from real estate rentals eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/are-businesses-that-primarily-derive-revenue-from-real-estate-rentals-eligible-for-a-7-a-l"},{"question":"Can a business primarily engaged in lending or investment be eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-business-primarily-engaged-in-lending-or-investment-be-eligible-for-a-7-a-loan"},{"question":"What impact does a principal's recent federal tax lien have on 7(a) loan eligibility, even if paid?","url":"https://dealroom.so/for-lenders/questions/what-impact-does-a-principal-s-recent-federal-tax-lien-have-on-7-a-loan-eligibility-even-i"},{"question":"How does the SBA define 'passive business' making it ineligible for a 7(a) loan, and what specific activities might trigger this?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-define-passive-business-making-it-ineligible-for-a-7-a-loan-and-what-spec"}],"related_terms":[{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"Standard 7(a) loan","url":"https://dealroom.so/glossary/standard-7-a-loan"},{"term":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-loan"},{"term":"7(a) Small Loan","url":"https://dealroom.so/glossary/7-a-small-loan"},{"term":"Variable-rate 7(a) loan","url":"https://dealroom.so/glossary/variable-rate-7-a-loan"},{"term":"SBA 7(a) Loan Program","url":"https://dealroom.so/glossary/sba-7-a-loan-program"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/what-if-a-business-seeking-a-7-a-loan-derives-a-significant-portion-of-its-revenue-from-se","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}