Glossary · Reading the business
In short
A fraudulent business model where participants profit primarily from recruiting new members, not from selling legitimate products or services. It's an illegal and unsustainable scheme.
The SBA explicitly prohibits lending to businesses involved in pyramid sales or multi-level marketing where income is primarily derived from recruitment. During due diligence, rigorously vet the business model to ensure it's based on genuine sales and not a pyramid scheme, which would make it ineligible for an SBA loan.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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