Sorry, You’re Not Eligible For PPP Money

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closed for businessThe rush to submit your PPP application may be for naught if you own an ineligible business. The SBA prohibits loan guarantees to “businesses primarily engaged in lending, investments, or to an otherwise eligible business engaged in financing or factoring.” If there’s any confusion as to what that includes, the SBA lists 7 specific ineligible business types under this definition in the statutory code. They include:

  • Banks
  • Life Insurance Companies (but not independent agents);
  • Finance Companies
  • Factoring Companies
  • Investment Companies
  • Bail Bond Companies
  • Other businesses whose stock in trade is money

The PPP’s interim final rule refers to this statute as a rule for ineligibility as it applies to the PPP.

The statute does list a handful of businesses engaged in lending that may traditionally qualify for an exception. They are as follows:

  • A pawn shop that provides financing is eligible if more than 50% of its revenue for the previous year was from the sale of merchandise rather than from interest on loans.
  • A business that provides financing in the regular course of its business (such as a business that finances credit sales) is eligible, provided less than 50% of its revenue is from financing its sales.
  • A mortgage servicing company that disburses loans and sells them within 14 calendar days of loan closing is eligible. Mortgage companies primarily engaged in the business of servicing loans are eligible. Mortgage companies that make loans and hold them in their portfolio are not eligible.
  • A check cashing business is eligible if it receives more than 50% of its revenue from the service of cashing checks.
  • A business engaged in providing the services of a financial advisor on a fee basis is eligible provided they do not use loan proceeds to invest in their own

deBanked is not a law firm. Consult a CPA or an attorney to provide better guidance on your company’s eligibility.

Last modified: April 29, 2020
Sean Murray


Category: Business Lending, Factoring, PPP, Regulation


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