This section is not intended to be definitive and is not a substitution for the knowledgeable application of the SBA operating manual. It is intended only to give a general idea of the types of businesses and activities that can be financed under the SBA 504 program and of certain ineligible businesses. Other SBA programs such as the 7(a) loan program have broader uses and should be considered for working capital and similar needs. See your local bank for information on the 7(a) program or go to the SBA web site.
Participating businesses must be organized for profit U. S. based businesses. Businesses must fall under SBA size standards and cannot be dominant in their field. There must be no prior loss to the government by the business, its principles or associates. The business must not be engaged in illegal business activities and the owners of the business must not be of poor moral character. Government owned businesses are not eligible. There are also bars to financing businesses that derive more than a third of gross revenue from gambling or that are engaged primarily in the promotion of religion as well as consumer and marketing cooperatives.
Participating businesses cannot be engaged in certain types of business activities including speculation, political or lobbying activities or providing prurient sexual material. A participating business cannot restrict its patronage, it cannot sell through pyramid plans, it cannot be a life insurance company or a lending businesses nor can it be a passive developer or landlord not actively engaged in the use of the project being financed. Exceptions to this last are certain Eligible Passive Companies.