For SBA lenders
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.
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.
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.
Insider move
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.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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