For SBA lenders
Short answer
Businesses involved in multi-level marketing or pyramid sales schemes are generally ineligible for SBA 7(a) loans due to the speculative nature and potential for unfair practices.
The SBA prohibits financing for businesses engaged in activities deemed speculative, unproven, or with potential for consumer harm. Multi-level marketing schemes, especially those resembling pyramid structures where revenue is primarily derived from recruitment rather than product sales, fall under these ineligible categories.
A loan applicant seeks funds to expand their business, which involves recruiting distributors who pay an upfront fee and then recruit others. The lender identifies this as a potential pyramid scheme and determines the business is ineligible for a 7(a) loan.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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