You can use the loan proceeds to help finance a large variety of business purposes. However, there are a few restrictions. For example, proceeds can’t be used to buy an asset to hold for its potential increased value or to reimburse an owner for the money they previously put into their business.
Basic uses for 7(a) loan proceeds include:
To provide long-term working capital to use to pay operational expenses, accounts payable and/or to purchase inventory
Short-term working capital needs, including seasonal financing, contract performance, construction financing and exporting
To purchase equipment, machinery, furniture, fixtures, supplies or materials
To purchase real estate, including land and buildings
To construct a new building or renovate an existing building
To establish a new business or assist in the acquisition, operation or expansion of an existing business
To refinance existing business debt, under certain conditions
SBA loans cannot be used for these purposes:
To refinance existing debt where the lender is in a position to sustain a loss and SBA would take over that loss through refinancing
To affect a partial change of business ownership or a change that will not benefit the business
To permit the reimbursement of funds owed to any owner, including any equity injection or injection of capital to continue the business until the SBA-backed loan is disbursed
To repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow
For a purpose that is not considered to be a sound business purpose as determined by SBA
2323 S. Atlantic Blvd. Monterey Park, CA 91754 (323) 268-6100 Fax: (323) 265-0342
Claremont Branch
390 W. Foothill Blvd. Claremont, CA 91711 (909) 625-7891 Fax: (909) 621-2512
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