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Businesses cannot be engaged in illegal activities, loan packaging, speculation, multi sales distribution, gambling, investment or lending, or where the owner is on parole.

Specific types of businesses not eligible include:

REAL ESTATE INVESTMENT firms exist when the real property will be held for investment purposes as opposed to loans to otherwise eligible small business concerns for the purpose of occupying the real estate being acquired.

OTHER SPECULATIVE ACTIVITIES are those firms developing profits from fluctuations in price rather than through the normal course of trade, such as wildcatting for oil and dealing in commodities futures, when not part of the regular activities of the business. Dealers of rare coins and stamps are not eligible.

LENDING ACTIVITIES include banks, finance companies, factors, leasing companies, insurance companies (not agents), and any other firm whose stock in trade is money.

PYRAMID SALES PLANS are characterized by endless chains of distributors and sub-distributors where a participant’s primary incentive is based on the sales made by an everincreasing number of participants. Such products as cosmetics, household goods, and other soft goods lend themselves to this type of business.

ILLEGAL ACTIVITIES are by definition those activities which are against the law in the jurisdiction where the business is located. Included in these activities are the production, servicing, or distribution of otherwise legal products that are to be used in connection with an illegal activity, such as selling drug paraphernalia or operating a motel that permits illegal prostitution.

GAMBLING ACTIVITIES include any business whose principal activity is gambling. While this precludes loans to race tracks, casinos, and similar enterprises, the rule does not restrict loans to otherwise eligible businesses, which obtain less than one-third of their annual gross income from either: 1) the sale of official state lottery tickets under a state license, or 2) legal gambling activities licensed and supervised by a state authority.

CHARITABLE, RELIGIOUS, OR OTHER NON-PROFIT or eleemosynary institutions, government-owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives are not eligible.

USE OF PROCEEDS 7(a) loan proceeds may be used to establish a new business or to assist in the operation, acquisition or expansion of an existing business. These may include (non-exclusive):

  1. To purchase land or buildings, to cover new construction as well as expansion or conversion of existing facilities;
  2. To acquire equipment, machinery, furniture, fixtures, supplies, or materials;
  3. For long term working capital including the payment of accounts payable and/or for the purchase of inventory;
  4. To refinance existing business indebtedness which is not already structured with reasonable terms and conditions;
  5. For short term working capital needs including: seasonal financing, contract performance, construction financing, export production, and for financing against existing inventory and receivable under special conditions; or
  6. To purchase an existing business.



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