Can an SBA loan buy a work truck or other vehicle?
Short answer
A 7(a) loan can, as a fixed asset used in the business (13 CFR 120.120(a)(6)). SOP 50 10 8.1, App. 19 addresses vehicles bought with loan proceeds. A 504 loan generally cannot (13 CFR 120.884(e)(2)). Vehicles held for resale are different. Lender policy varies.
A 7(a) loan can buy a vehicle used in the business, and lender policy on vehicles varies. A 504 loan generally cannot.
7(a) and SBA Express
13 CFR 120.120(a)(6) covers fixed assets in general, and SBA does not list vehicles as a separate use. Appendix 19 of SOP 50 10 8.1 does address them. Its general paragraph on vehicles refers to "the purchase price allocated to the vehicle when loan proceeds are used to acquire it."
A lender need not take a lien on a vehicle that already has one. It also need not take a lien on a vehicle worth $20,000 or less when the loan number is assigned. Value can come from an appraisal, an independent valuation company or website, or the allocated price. The lender must note the source in its credit memorandum.
Appendix 17 sets equipment terms at 10 years, or up to 15 years if the IRS asset class useful life supports it. It does not name vehicles, so ask your lender how it will classify one.
504 projects
13 CFR 120.884(e)(2) lists automobiles, trucks and airplanes as ineligible fixed-asset components. Heavy construction equipment is allowed only if integral to operations, with at least 10 years of remaining useful life (13 CFR 120.884(e)(3)).
Vehicles for resale
Buying vehicles to sell from a lot is a different question. Floor plan financing is barred (Sec. A, Ch. 3, Para. B.3).
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