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Home / Answers / Use of proceeds / Can an SBA loan pay past-due taxes?

Can an SBA loan pay past-due taxes?

Janover Capital editorial team · Checked November 8, 2026

Short answer

Not trust taxes. 13 CFR 120.130(e) bars paying past-due payroll, sales or similar taxes. SOP 50 10 8.1, Sec. A, Ch. 3, Para. B.6 may permit delinquent business income taxes if you have an approved IRS payment arrangement and are current on it.

Proceeds cannot pay past-due taxes you were required to collect and hold in trust. That covers federal, state and local payroll taxes, sales taxes and similar taxes (13 CFR 120.130(e); SOP 50 10 8.1, Sec. A, Ch. 3, Para. B.6.a).

The one opening

Paragraph B.6.b addresses delinquent business income taxes. Payment may be permitted if you have an approved payment arrangement with the IRS and are current on the payments in it.

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What you certify

Before disbursement you certify that the business is current on all federal, state and local taxes, including income, payroll, real estate and sales taxes. You also agree to pay them when due (Sec. B, Ch. 6, Para. D.8). SBA Form 1919 has the same statements.

The SOP does not explain how that certification applies to a business in an IRS arrangement. Raise it with the lender early.

Unpaid taxes are not a "loss" under the Prior Loss rule (Sec. A, Ch. 1, Para. E). That rule is about defaults on federal loans.

Sources

  1. 13 CFR ยง 120.130
  2. SOP 50 10 8.1, Sec. A, Ch. 3, Para. B, Restrictions on Uses of Proceeds, Para. B.6 (p. 53)
  3. SOP 50 10 8.1, Sec. B, Ch. 3, Para. A.2, MARC ineligible uses (p. 135)
  4. SOP 50 10 8.1, Sec. B, Ch. 4, Para. A, CAPLines uses of proceeds (p. 144)
  5. SOP 50 10 8.1, Sec. B, Ch. 6, Para. D.8, Borrower Certifications (Para. D begins p. 207)
  6. SBA Form 1919 (02/2025), certifications
  7. SOP 50 10 8.1, Sec. A, Ch. 1, Para. E, Prior Loss to the Government (Para. E begins p. 18)

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