An SBA 7(a) loan is a type of small business loan that is partially guaranteed by the Small Business Administration (SBA) to provide the financial assistance small businesses need to start, operate or expand a business. 

Allowable Uses of Proceeds for a SBA 7(a) Loan

This is a review of allowable uses of proceeds for a SBA 7(a) loan, including SBA Express loans and SBA Small Loans (< $350,000).

It is important when underwriting the SBA loans that there be a sources and uses table in the credit memo that outlines each category and the amount of the loan request attributable to that category.

Except for a small allowance (10% Rule) or a 327 Action (Change approval sent to SBA) all proceeds must be disbursed in the category in which they are outlined. Please note that no monies cannot go directly to individuals, these loans are for the benefit of the business.

Allowable uses of proceeds:

  • Purchase, construction or renovation of real estate
  • Tenant improvements to leased property
  • Purchase of furniture, fixtures and equipment for the business
  • Inventory or Supplies
  • Business Acquisition
  • Working Capital (not for EPC in a EPC/OC structure)
  • Qualified debt refinance (special rules apply)
  • Packaging fee, SBA guaranty fee and third party costs