Title 13

SECTION 120.130

120.130 Restrictions on uses of proceeds.

§ 120.130 Restrictions on uses of proceeds.

SBA will not authorize nor may a Borrower use loan proceeds for the following purposes (including the replacement of funds used for any such purpose):

(a) Payments, distributions or loans to Associates of the applicant (except for ordinary compensation for services rendered);

(b) Refinancing a debt owed to a Small Business Investment Company (“SBIC”) or a New Markets Venture Capital Company (“NMVCC”);

(c) Floor plan financing or other revolving line of credit, except under § 120.340 or § 120.390;

(d) Investments in real or personal property acquired and held primarily for sale, lease, or investment (except for a loan to an Eligible Passive Company or to a small contractor under § 120.310);

(e) The applicant may not use any of the proceeds to pay past-due Federal, state, or local payroll taxes, sales taxes, or other 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.

(f) A purpose which does not benefit the small business; or

(g) Any use restricted by §§ 120.201, 120.202, and 120.884 (specific to 7(a) loans and 504 loans respectively).

[61 FR 3235, Jan. 31, 1996, as amended at 76 FR 9218, Feb. 17, 2011; 76 FR 63545, Oct. 12, 2011; 82 FR 39502, Aug. 21, 2017; 85 FR 7648, Feb. 10, 2020; 85 FR 80588, Dec. 14, 2020]

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