Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What type of business activity would disqualify a business from receiving SBA 7(a) loan assistance?

1. Pyramid sale distribution plans

2. Retail product sales

3. Professional services

4. Franchise operations

The correct answer is: Pyramid sale distribution plans

A business engaged in pyramid sale distribution plans would be disqualified from receiving SBA 7(a) loan assistance because these types of plans are considered illegal and unethical. Pyramid schemes rely on recruiting new participants to generate income, rather than on the sale of legitimate products or services. This inherently unsustainable business model often harms consumers and leads to significant financial losses for participants, prompting regulatory scrutiny and prohibition by authorities. The SBA aims to support businesses that demonstrate positive economic impact and ethical practices. Therefore, they exclude applicants involved in activities that are considered fraudulent or deceptive, such as pyramid schemes, from funding opportunities. In contrast, other business activities mentioned, like retail product sales, professional services, and franchise operations, typically adhere to legal standards and ethical guidelines, making them eligible for SBA assistance.