Glossary · The loan itself
Multi-level marketing scheme
In short
This is a business model where participants earn money from both direct sales and recruiting new distributors. It's an ineligible business type for SBA loans because it often resembles a pyramid scheme and lacks a sustainable primary revenue source.
What it means in a deal
The SBA specifically prohibits financing businesses that are primarily engaged in multi-level marketing. If the business you're looking at relies heavily on recruitment and a complex compensation structure, it will not qualify for an SBA 7(a) loan. This is a deal-breaker.
Official sources
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.
Related terms
Common questions about Multi-level marketing scheme
- How does the SBA evaluate the eligibility of an applicant business involved in multi-level marketing or pyramid sales schemes?
- Can a business engaged in multi-level marketing (MLM) be eligible for a 7(a) loan?
- Is it necessary to obtain separate life insurance policies for each owner in a multi-owner business?
- What level of environmental due diligence is required for leasehold improvements only, without real estate acquisition?
- Are marketing and advertising expenses allowed uses for 7(a) loan funds?
- What level of debt service coverage ratio (DSCR) does an SBA 7(a) lender typically look for?
Defined by CapBench 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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