Can a bank, finance company or factoring company get an SBA loan?
Short answer
No. SBA cannot guarantee a loan to a business primarily engaged in lending or investment. Banks, finance companies, factoring companies, investment companies and bail bond companies are all barred. Source: 13 CFR § 120.110(b); SOP 50 10 8.1, Sec. A, Ch. 1, Para. E.2.
No. 13 CFR § 120.110(b) makes financial businesses primarily engaged in lending ineligible. SOP 50 10 8.1, Sec. A, Ch. 1, Para. E.2 names the group:
- Banks.
- Life insurance companies, though not independent agents.
- Finance companies.
- Factoring companies.
- Investment companies.
- Bail bond companies.
- Other businesses whose stock in trade is money.
Operating businesses with a financing arm
The ban also reaches an otherwise eligible business engaged in financing, factoring or investment not related or essential to the business. A retailer that also makes unrelated loans should expect questions.
A business that finances its own credit sales is treated differently. It is eligible if less than 50% of its revenue comes from financing its sales (Para. E.2.b). A dealer with in-house payment plans is one example.
Disclosure
Form 1919, question 7, asks whether any of your revenue comes from lending activities. A yes requires a separate attachment with details.
Limited exceptions
Some financial businesses can qualify under the limited circumstances in Para. E.2.b. They include pawn shops, check cashers, certain mortgage companies and fee-based financial advisors. Each has its own test.
Ask lending partners about your loan
Tell us the amount you need and what it is for. We refer you to lenders that may fund businesses like yours, and it costs you nothing.
Janover Capital LLC is not a lender and is not the SBA. The lender makes the credit decision. A lender or marketplace may pay us a referral fee if we connect you, at no cost to you. Advertiser disclosure.