Glossary · Reading the business
Not engaged in lending rule
In short
This SBA rule states that businesses primarily engaged in lending, such as banks or loan companies, are ineligible for 7(a) loans. It ensures SBA funding supports operating businesses, not financial intermediaries.
What it means in a deal
When evaluating a target business, verify its primary activities and NAICS code to ensure it doesn't fall under the 'not engaged in lending' exclusion. Businesses that derive more than 50% of their revenue from lending or passive investments are generally ineligible. This is a fundamental eligibility check you must make early.
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 Not engaged in lending rule
- How does the 'not engaged in lending' rule apply to a loan applicant?
- Can a business primarily engaged in lending or investment be eligible for a 7(a) loan?
- Can a business primarily engaged in lending or passive investments qualify for an SBA 7(a) loan?
- Does the SBA allow a business primarily engaged in lending or investments to be eligible for a 7(a) loan?
- What specific criteria must an entity meet to be considered 'engaged in lending' and thus ineligible for a 7(a) loan?
- Can a business engaged in political lobbying be eligible for a 7(a) loan?
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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