SBA rules · SOP 50 10 8.1

Can an SBA loan finance a business that sells adult products?

An SBA loan may finance the business only if the items are not of a prurient sexual nature, or if they are, the business derives 5% or less of its gross revenue from their sale.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Lender evaluation: The lender must evaluate whether the nature and extent of the sexual component cause the business activity to be prurient.
Revenue threshold: A business is ineligible if it derives more than 5% of its gross revenue, directly or indirectly, through the sale of products, services, or depictions of a prurient sexual nature.
De minimis exception: SBA interprets the 5% gross revenue limit as the de minimis threshold for sales of products or services of a prurient sexual nature.
Compliance with law: The business and all products sold must be completely legal under federal, state, and local law.
What the SOP does not cover: The SOP does not explicitly define "adult products" or "novelty items," meaning the lender must determine on a case-by-case basis whether specific items are prurient.

The source

What the SOP says

“It derives more than 5% of its gross revenue, directly or indirectly, through the sale of products, services or the presentation of any depictions or displays of a prurient sexual nature. For this purpose, the 5% threshold is interpreted as the de minimis threshold for gross revenue.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > A business is not eligible for SBA assistance if: (lines 473-475)✓ Verified

“The SBA Lender must consider whether the nature and extent of the sexual component cause the business activity to be prurient.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Special Requirements Applicable to Native American Businesses: (lines 472-472)✓ Verified

“Businesses that are engaged in any activity that is illegal under federal, state, or local law are not eligible. 13 CFR § 120.110 (h)

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Life insurance carriers are not eligible. 13 CFR § 120.110(d) (lines 435-444)✓ Verified

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