Can an SBA loan be used to buy inventory?
Short answer
Yes, on a 7(a) loan. Inventory, supplies and raw materials are eligible uses (13 CFR 120.120(b); SOP 50 10 8.1, Sec. A, Ch. 3, Para. A.2). The term can run up to 10 years. A 504 loan cannot buy inventory.
Yes. Inventory is an eligible use on 7(a) loans, including SBA Express, and on microloans (13 CFR 120.120(b); 13 CFR 120.707(a)). A 504 loan cannot buy it. SBA's 504 page says so directly.
Section A, Chapter 3, Paragraph A.2 of SOP 50 10 8.1 lists inventory, supplies and raw materials, including work in progress. Appendix 17, Paragraph A.1 caps the term for working capitalMoney for day-to-day costs such as payroll, rent and inventory. Full definition or inventory loans at 10 years.
Where inventory financing stops
Floor plan financing is barred, even under CAPLines (Sec. A, Ch. 3, Para. B.3; Sec. B, Ch. 4, Para. A.1.b). That matters if you want to finance each unit on your lot until it sells.
Collateral depends on the program
On a Standard 7(a), SBA leaves it to the lender whether to take a lien on receivables or inventory. If it does, no more than 10% of current book value counts toward the fully secured test (App. 19, Para. B.1).
A Working Capital CAPLine disbursed on a borrowing base needs a first lien on receivables and inventory (App. 19, Para. B.5). When a Working Capital CAPLine advances against inventory, the advance rate cannot exceed 50% of eligible inventory (Sec. B, Ch. 4, Para. F). An exception needs SBA's prior written concurrence.
A Seasonal CAPLine is built for the same need, but only for the seasonal increase in receivables and inventory (Sec. B, Ch. 4, Para. A.3.b). Ask your lender which structure fits how your stock turns.
Sources
- 13 CFR § 120.120
- 13 CFR § 120.707
- SOP 50 10 8.1, Sec. A, Ch. 3, Para. A, Eligible Uses of Proceeds, Para. A.2 (p. 51)
- SOP 50 10 8.1, App. 17, Para. A.1, Loan Maturity Requirements (p. 390)
- SOP 50 10 8.1, App. 19, Paras. B.1 and B.5, Collateral (Para. B begins p. 408)
- SOP 50 10 8.1, Sec. B, Ch. 4, Para. F, CAPLines closing and disbursement (Para. F begins p. 154)
- sba.gov/loans/504-loans, read November 8, 2026
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