Can a multilevel marketing business get an SBA loan?
Short answer
No. Businesses using pyramid or multilevel sales distribution plans are not eligible. The SOP gives no revenue threshold or exception. Source: 13 CFR § 120.110(f); SOP 50 10 8.1, Sec. A, Ch. 1, Para. E.
No. SOP 50 10 8.1, Sec. A, Ch. 1, Para. E says businesses using pyramid or multilevel sales distribution plans are not eligible. 13 CFR § 120.110(f) lists pyramid sale distribution plans as an ineligible category.
What the rule covers
The SOP language reaches both pyramid and multilevel plans. It does not define those terms. It also sets no revenue percentage and no exception, unlike the gambling and lending rules.
Where the line is unclear
Neither source says how SBA treats a business that sells a multilevel company's products as a small side line. The rule turns on using such a plan, so a side line still raises the question. Raise it with your lender before you apply.
Agreements that look like franchises
A distribution agreement can look like a franchise. SBA treats any relationship meeting the Federal Trade Commission (FTC) definition as a franchise, including license, jobber and dealer agreements (Para. G). Those brands must be on SBA's Franchise Directory. The Directory lists only business models SBA determines are eligible.
Illegal schemes
Businesses engaged in activity that is illegal under federal, state or local law are separately ineligible under 13 CFR § 120.110(h).
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