Chemical Manufacturing Business Plan
If you make soap, cosmetics, paint, adhesives, dietary supplements or cleaning products, your industry sits in NAICS subsector 325, Chemical Manufacturing, and you may not know it. "325 CHEMICAL MANUFACTURING" is on Appendix 6 of SBA SOP 50 10 8.1, and because it is a three-digit code the SOP says it "includes all industries beginning with those 3 digits". Where commercial real estate is offered as security and a current or known prior use of it is a 325 use (a unit in a Multi-Unit Building excepted), the environmental investigation "must begin with a Phase I, regardless of the amount of the loan", with no questionnaire start however small the borrowing. The Census Bureau's NAICS index puts candle making in 339999, not 325.
Verify every requirement with the named agency and your lender before committing capital. Chemical manufacturing is regulated federally and at state level for air, water, waste and worker exposure, and some products carry their own regimes entirely. Equipment and facility costs are specific to your process and we have not surveyed them.
The classification catches far more businesses than people expect
The founder of a small cosmetics or cleaning-product company may not think of the business as a chemical manufacturer. SBA's list does not ask what you call yourself.
SOP 50 10 8.1 carries Appendix 6: NAICS Codes of Environmentally Sensitive Industries, which names:
325 CHEMICAL MANUFACTURING
And the SOP states the reach of a code like that explicitly:
A 3 digit NAICS code includes all industries beginning with those 3 digits
So it is not just industrial chemicals. SBA's size standards table, 13 CFR 121.201, lists the industries under Subsector 325: basic chemicals, resins, fertilizers and pesticides, pharmaceuticals, paints, coatings and adhesives, and "325611 Soap and Other Detergent Manufacturing", "325612 Polish and Other Sanitation Good Manufacturing" and "325620 Toilet Preparation Manufacturing". The Census Bureau's 2022 NAICS index files cosmetic creams and lotions under 325620 and dietary supplements under 325411 and 325412.
There is a second entry worth knowing if your classification is genuinely borderline:
339 MISCELLANEOUS MANUFACTURING (only required if hazardous materials are involved)
Note the difference. The 325 entry carries no condition; the 339 entry applies only if hazardous materials are involved. Candle making is an example: the Census index files it under 339999, All Other Miscellaneous Manufacturing, not under 325. Which code your lender assigns is therefore worth discussing deliberately rather than discovering at diligence.
Distribution has its own entry: Appendix 6 also prints "4246 CHEMICAL & ALLIED PRODUCTS MERCHANT WHOLESALERS", with no condition. The Census index files wholesalers of cleaning compounds, detergents and industrial chemicals under 424690, inside that entry; it files cosmetics and dietary supplement wholesalers under 424210 and paint wholesalers under 424950, which Appendix 6 does not list. So buying in finished product instead of making it does not by itself take a use off the list.
What that means for your loan
The rule follows the collateral. SOP 50 10 8.1, Section A, Chapter 5, requires an Environmental Investigation of "all commercial Property upon which a security interest such as a mortgage, deed of trust, or leasehold deed of trust is offered as security for a loan or debenture". Except for a unit in a Multi-Unit Building (non-industrial, four or more units), the lender must make a Good Faith effort to determine the NAICS codes for "the Property’s current and known prior uses" and compare them with Appendix 6.
With a match, the cheap route closes. Otherwise the SOP allows that "If the loan amount is up to and including $250,000, the Environmental Investigation may begin with an Environmental Questionnaire." On a loan of more than $250,000 the investigation "must, at a minimum, begin with an Environmental Questionnaire and Records Search with Risk Assessment". For an "environmentally sensitive industry identified in Appendix 6", the investigation "must begin with a Phase I, regardless of the amount of the loan", conducted in accordance with "the most recently adopted standard for a Phase I ESA established by ASTM International, currently ASTM E1527-21".
And if the Environmental Professional "concludes that further investigation is warranted (typically a Phase II), and the SBA Lender still wants to make the loan, the SBA Lender must proceed as recommended by the Environmental Professional", or in the alternative ask SBA for an exception to policy. The same paragraph says "SBA will require compliance with all of an Environmental Professional’s recommendations" and gives secondary containment and sealing floor drains as examples of the housekeeping measures that includes.
The asymmetry worth planning around: the match is on the property's current and known prior uses, not only your intended process. A known prior 325 use of the building produces the match even if your own code would not, so the use history of each site belongs in your comparison, next to the rent. We have not surveyed what a Phase I or a Phase II costs.
Is chemical manufacturing profitable?
In our view it depends mostly on where you sit between commodity and formulation.
Commodity chemistry competes on cost per ton against producers with far greater scale. Formulation, specialty and private-label work competes on capability, regulatory competence and reliability. The version that is easiest to document is contract or private-label manufacturing with named customers, because the plan can show a contracted order book instead of a forecast brand build.
We have not surveyed sector margins and will not publish figures we have not measured. For 504 loans the SOP lists a "Restricted or limited customer base" among the credit weaknesses for which additional Borrower contribution or collateral may be appropriate, so address customer concentration, input price exposure and the state of your compliance before anyone asks.
The compliance layer that belongs in the plan, not an appendix
- Air and water permitting where your process requires it, at state level as well as federal: the Clean Air Act and the Clean Water Act both provide for permit programs run under state law.
- Hazardous waste generator status, which under 40 CFR 262.13 is "based on the amount of hazardous waste generated each month and may change from month to month" and determines your obligations.
- Worker exposure and process safety, including hazard communication under OSHA's standard, 29 CFR 1910.1200, which is an operating cost and a real liability.
- Product-specific regimes. Cosmetics, dietary supplements, pesticides, drugs and architectural coatings each have federal rules of their own, with their own exemptions, and your product may sit under more than one.
- Storage, secondary containment and separation of incompatible materials, which is a building design question before it is a procedure.
Describe your actual arrangements: each permit, the agency that issues it and its status. A plan that asserts compliance without naming a single permit gives its reader nothing to check.
How do you fund chemical manufacturing?
On a 7(a) loan the test is whether the business is a start-up, and it is about the business rather than the operator:
SBA considers a business to be a "start-up" for the purpose of determining equity injection requirements if it has been in operation (i.e., generating revenue from intended operations) for 1 year or less.
On a Standard 7(a) or 7(a) Small loan a start-up needs an equity injection of at least 10 percent of "all costs required to become operational, regardless of the source of funds, except for lines of credit and 504 loans". For a manufacturer that base is large: reactors or blending vessels, filling and packaging lines, laboratory and QC capability, permitting, and the raw material inventory you need before the first order ships. On our reading, equipment a vendor finances on a term note stays in the base; lines of credit and 504 loans are the two printed exceptions. For SBA Express loans the SOP says "whether to require an equity injection, is left to the business judgment of the Lender".
A 504 loan uses a different test. 13 CFR 120.910(a) sets the Borrower's minimum contribution as a percentage of "the Project cost, excluding administrative costs", and the SOP (Section C, Chapter 1) states the minimums: at least 10 percent, 15 percent for a New Business, one "in operation for 2 years or less at the time the loan is approved", or for a Limited or Special Purpose Property, and 20 percent for both. Appendix 3 adds that an older business "may be considered a New Business if it is a change of ownership that will result in new, unproven ownership/management and increased debt unrelated to business operations", which is relevant if you are buying an existing plant, and that "When an existing business starts a business that is in the same 3-digit NAICS code with identical ownership, and they are Co-Borrowers, SBA considers this to be a business expansion and not a new business."
Chemical manufacturing is not named on the Limited or Special Purpose Property list. The SOP says that list "is not intended to be all-inclusive", requires the CDC to "address whether the Project Property is Limited or Special Purpose in their credit memorandum and include an explanation of their conclusion", and defines the term in Appendix 3 as a "limited-market property with a unique physical design, special construction materials, or a layout that restricts its utility to the use for which it was built". So a purpose-built process facility with fixed vessels and containment is worth raising with the CDC early. Our free SBA equity requirement calculator shows what each answer costs.
What must your chemical manufacturing business plan contain?
- Your NAICS classification and the Appendix 6 consequence, addressed before you are asked, with the use history of any real estate offered as security. If you believe 339 applies rather than 325, say why.
- The permitting timeline, with dates, and the cash to carry it. A permit you must hold before you operate comes before revenue. Put the environmental work on the same timeline: "Environmental Investigation Reports must be dated within one year of the date of issuance of the SBA loan number."
- Named customers or a named channel. A contract or private-label order book documents demand; a brand launch has to argue for it.
- Input price exposure, modeled rather than asserted.
- Batch economics: minimum viable batch, changeover time and cleaning cost between products. Leave them out and the unit margin is overstated.
- A project cost schedule covering all costs required to become operational, with the equity injection identified and its source documented.
We write SBA business plans and financial models for exactly this kind of filing, including the project cost build-up and monthly cash flow projections with their supporting assumptions. Fees are fixed and published, and we never charge a percentage of anything you borrow or raise.
Frequently asked questions
Am I a chemical manufacturer if I make soap or cosmetics?
For NAICS purposes, yes. SBA's size standards table, 13 CFR 121.201, puts soap manufacturing in 325611 and toilet preparations in 325620, and Appendix 6 of SOP 50 10 8.1 lists "325 CHEMICAL MANUFACTURING", stating that "A 3 digit NAICS code includes all industries beginning with those 3 digits". Confirm your classification with your lender rather than assuming the everyday meaning of the words.
Does that mean I need a Phase I?
Under SOP 50 10 8.1, where commercial real estate is offered as security and a current or known prior use of it matches Appendix 6, the investigation "must begin with a Phase I, regardless of the amount of the loan"; the allowance to start with an Environmental Questionnaire on loans up to $250,000 does not apply. A unit in a Multi-Unit Building is excepted from the matching step.
What if my products are not hazardous?
The 325 entry in Appendix 6 of SOP 50 10 8.1 carries no conditional bracket, so the absence of hazardous materials does not remove it. The conditional entry is "339 MISCELLANEOUS MANUFACTURING (only required if hazardous materials are involved)", a different code, where the Census index files candle making. If you think you belong there, make the argument explicitly.
Is a chemical plant a special purpose property?
A chemical plant is not named on the Limited or Special Purpose Property list in the 504 section of SOP 50 10 8.1. But the list is expressly not all-inclusive and the CDC must record a conclusion. On a 504 loan the label lifts the minimum Borrower contribution from 10 to 15 percent, or from 15 to 20 for a New Business, so raise a purpose-built process facility early.
Does leasing instead of buying avoid the issue?
Not by itself. SOP 50 10 8.1 requires an Environmental Investigation of "all commercial Property upon which a security interest such as a mortgage, deed of trust, or leasehold deed of trust is offered as security for a loan or debenture". The test is what your lender takes as collateral, including a leasehold interest, not whether the loan buys the building. See our SBA environmental requirements guide.
Sources: SBA SOP 50 10 8.1, effective 1 October 2026 (Section A, Chapter 5; Section B, Chapters 1 and 2; Section C, Chapter 1; Appendices 3, 4 and 6); 13 CFR 120.910 and 13 CFR 121.201; the Census Bureau's 2022 NAICS index file; 40 CFR 262.13; 29 CFR 1910.1200; 21 CFR 111.1; 40 CFR 59.400; 7 U.S.C. 136a; 21 U.S.C. 360, 364c and 364h; 33 U.S.C. 1342; 42 U.S.C. 6926 and 7661a. All retrieved and checked against the raw text on 10 October 2026; each CFR passage quoted or relied on reads the same in the latest govinfo annual edition and in the current Legal Information Institute text. 29 CFR 1910.1200 is cited from the current text because the newest annual edition, revised as of 1 July 2024, does not incorporate the amendments published from May 2024 to February 2026. Not verified, so left out: sector margins, equipment and facility costs, and report prices.
This page summarizes SBA SOP 50 10 8.1 and the other sources listed above as retrieved on 10 October 2026. It is general information, not lending, legal, environmental or regulatory advice, and it is not a commitment to lend. We are not a lender, a CDC, attorneys or an Environmental Professional. For the environmental step the SOP has the SBA Lender determine the NAICS codes. Chemical, cosmetic, supplement and pesticide regulation is extensive and changes. Confirm every requirement with the relevant agencies and your lender before you commit capital.