---
kind: "section"
citation: "13 C.F.R. § 120.120"
title: "13"
number: "120.120"
heading: "What are eligible uses of proceeds?"
url: "https://uscodex.org/cfr/13/120.120"
---

# §120.120. What are eligible uses of proceeds?


A small business must use an SBA business loan for sound business purposes.

- (a) A Borrower may use loan proceeds from any SBA loan to:
  - (1) Acquire land (by purchase or lease);
  - (2) Improve a site (e.g., grading, streets, parking lots, landscaping), including up to 5 percent for community improvements such as curbs and sidewalks;
  - (3) Purchase one or more existing buildings;
  - (4) Convert, expand or renovate one or more existing buildings;
  - (5) Construct one or more new buildings; and/or
  - (6) Acquire (by purchase or lease) and install fixed assets (for a 504 loan, these assets must have a useful life of at least 10 years and be at a fixed location, although short-term financing for equipment, furniture, and furnishings may be permitted where essential to and a minor portion of the 504 Project).
- (b) A Borrower may also use 7(a) and microloan proceeds for:
  - (1) Inventory;
  - (2) Supplies;
  - (3) Raw materials; and
  - (4) Working capital (if the Operating Company is a co-borrower with the Eligible Passive Company, part of the loan proceeds may be applied for working capital and/or the purchase of other assets, including intangible assets, for use by the Operating Company).
- (c) A Borrower may use 7(a) loan proceeds for refinancing certain outstanding debts.

## Notes

### Amendments

[61 FR 3235, Jan. 31, 1996, as amended at 77 FR 19533, Apr. 2, 2012; 88 FR 21899, Apr. 12, 2023]

### Authority

Authority: 15 U.S.C. 634(b) (6), (b) (7), (b) (14), (h), and note, 636(a), (h) and (m), 650, 687(f), 696(3) and (7), and 697(a) and (e); sec. 521, Pub. L. 114-113, 129 Stat. 2242; sec. 328(a), Pub. L. 116-260, 134 Stat. 1182.

### Source

Source: 61 FR 3235, Jan. 31, 1996, unless otherwise noted.

### Amendments

[61 FR 3235, Jan. 31, 1996, as amended at 77 FR 19533, Apr. 2, 2012; 88 FR 21899, Apr. 12, 2023]