6 Kinds of Small Businesses That Don’t Qualify for Bank Loans

3. Sexual Health and Wellness

If anyone understands the importance of sexual wellness and expression, it’s government bureaucrats, right? Whether you’re an upscale adult toy store like San Francisco’s Good Vibrations, or just a humble LGBT bookstore that sells a variety of adult books or products, you’re probably out of luck when it comes to benefiting from the SBA’s $19.2 billion a year loans program mentioned above.

Even “normal” businesses that sell just a few adult items are at risk of ineligibility. As long as some random bureaucrat determines that a business makes as little as 2.5% of their revenue directly OR indirectly from the sale of products that are “of an indecent sexual nature”, they are ineligible. (Actually, the SBA site is inconsistent on this. Most of the application forms say 5%, but perhaps in an effort to scare off otherwise-qualified borrowers, their main eligibility page says 2.5%).

4. Immigrants Who Don’t Have Green Cards

Most work visas for immigrants are tied to a specific employer, which makes the idea of starting a new business a moot point. Immigrants who are lucky enough to have a renewable 3 or 5 year visa without specific employment requirements, including the O1 visa for individuals of “extraordinary ability”, don’t qualify for small business bank loans.

5. Any Business that Employs Parolees

According to the U.S. Census, over 89% of employers are small firms of fewer than 20 employees. Since the recession, the Small Business & Entrepreneurship Council notes that over half of new jobs in the U.S. have been created by small businesses. It makes sense that we would want those who were recently granted parole to ‘go and get a job.’

Any “business with an “associate” who is incarcerated, on probation, on parole,” is ineligible to receive loans—this is according to the eligibility questionnaire that the SBA gives to the banks that actually provide loans. The SBA’s definition of the term ‘associate’ is extremely broad, and even includes any “close” or “secondary” relatives of an employee or agent of the business.

Similar to the restrictions mentioned above for businesses with even a minor “adult” component, it appears that the SBA might be trying to discourage potentially qualified business owners from applying in the first place.

6. Businesses Started by Someone Whose Credit is Less Than Stellar

Aspiring entrepreneurs with less than great credit scores may find it difficult to get the loans they need to start their own business. Yes, banks look at the health and revenue of the business first and foremost, but even loans that don’t require a personal guarantee often require the business owner to have ‘very good’ or even ‘great’ personal credit reports. If you want to know what category you might fit into, you are entitled to your free credit report every 12 months from each of the 3 major credit bureaus, which you can find at the government’s official site annualcreditreport.com

If you’re still paying Uncle Sam for past-due taxes, kiss that loan goodbye. Just like having a subpar personal credit report, owing back taxes when applying for a loan is what you could call a ‘non-starter’. Not only is owing back taxes a general indication that you have trouble fulfilling your financial obligations, but any amount owed to the IRS is a huge liability for the bank, since the IRS could come in and sell off your business assets in order to cover the debt.