SBA SOP 50 10 8.1, A.Ch3.B — Restrictions on Uses of Proceeds

SOP 50 10 8.1 A.Ch3.B

Effective 2026-10-01 · publisher's stamp for this provision

B. Restrictions on Uses of Proceeds 13 CFR § 120.130 Loan proceeds may not be used for any of the following purposes (including the replacement of funds used or borrowed for any such purpose): 1. Payments, distributions, or loans to an Associate of the Applicant (as defined in 13 CFR § 120.10), except for compensation for services actually rendered at a fair and reasonable rate or to facilitate 7(a) loans for changes of ownership in accordance with 13 CFR § 120.202 and the guidance in Section B of this SOP on partial changes of ownership; 2. Refinancing a debt owed to a Small Business Investment Company (SBIC) or a New Markets Venture Capital Company (NMVCC); 3. Floor plan financing; 4. Revolving lines of credit, except under SBA Express, CAPLines, Export Working Capital Program (EWCP), Manufacturers’ Access to Revolving Credit (MARC), and Export Express programs; 5. Investments in real or personal property acquired and held primarily for future development, sale, lease, or investment (except for a loan to an Eligible Passive Company or to a small contractor under the Builders CAPLine program). The purchase of excess land (land that is not for immediate use as part of the project) is not eligible to be funded by SBA loan proceeds; 6. Payment of Delinquent Taxes; a. Loan proceeds must not be used to pay past-due Federal, state, or local payroll taxes, sales taxes, or similar taxes that are required to be collected by the Applicant and held in trust on behalf of a Federal, state, or local government entity (13 CFR § 120.130(e)). b. Payment only for delinquent business income taxes may be permitted if the Applicant has an approved payment arrangement with the IRS and the Applicant is current on the payments in the arrangement. 7. 13 CFR § 120.881 For the 504 Loan Program only: To finance the relocation of the Applicant out of a community, if there will be a net reduction of one-third or more in the Applicant’s workforce or a substantial increase in unemployment in any area of the country. An exception may be allowed if the CDC can justify the relocation because: a. The relocation is for key economic reasons and crucial to the continued existence, economic well-being, and/or competitiveness of the Applicant; and b. The economic development benefits to the Applicant and the receiving community outweigh the negative impact on the community from which the Applicant is moving. 8. To pay any creditor in a position to sustain a loss causing a shift to SBA of all or part of a potential loss from an existing debt 13 CFR § 120.201 and 13 CFR § 120.884(b). 9. A purpose that does not benefit the small business, including a loan to an Applicant for the benefit of an affiliated business; 10. Whether at loan origination or as a servicing action, SBA Lenders may not permit a C-PACE loan to be made on a property that has or will have a 7(a) or 504 loan. 11. Any use restricted by 13 CFR §§ 120.201 and 120.884 (specific to 7(a) loans and 504 loans respectively).

Source: SBA SOP 50 10 8.1, A.Ch3.B — Restrictions on Uses of Proceeds · source URL · snapshot 0fb0c4692cf52938