# Can SBA loan proceeds cover payroll?

**Short answer:** Yes. Payroll is a normal operating expense paid from the working capital part of a 7(a) loan, and SOP 50 10 8.1, Sec. B, Ch. 6, Para. D.3.c does not require the lender to document each such disbursement. Past-due payroll taxes are barred.

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Last checked: 2026-11-08

Yes. Payroll is a normal use of 7(a) working capital. Section B, Chapter 6, Paragraph D.3.c of SOP 50 10 8.1 names payroll and utilities as examples of normal operating expenses.

That paragraph also sets the paperwork rule. If the SBA Terms and Conditions list working capital and the money pays normal operating expenses, the lender need not document that disbursement. Other uses need evidence, such as cancelled checks or paid receipts.

## What is not allowed

- **Past-due payroll taxes.** Proceeds cannot pay delinquent federal, state or local payroll taxes or other taxes held in trust (Sec. A, Ch. 3, Para. B.6; 13 CFR 120.130(e)).
- **Owner pay above fair value.** Pay to an owner must be for services actually rendered at a fair and reasonable rate (Sec. A, Ch. 3, Para. B.1).

## What you agree to

Before disbursement you certify that the business is current on federal, state and local taxes, including payroll taxes. You also agree to pay them when due (Sec. B, Ch. 6, Para. D.8). Working capital can also pay for software that processes payroll (Sec. A, Ch. 3, Para. A.2.d.i).

A Seasonal CAPLine is narrower. Its proceeds finance seasonal increases in receivables and inventory, or in some cases the associated increased labor costs (Sec. B, Ch. 4, Para. A.3.b).

## Sources

- [SOP 50 10 8.1, Sec. B, Ch. 6, Paras. D.3 and D.8, Loan Closing and Disbursement (Para. D begins p. 207)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. A, Ch. 3, Para. A, Eligible Uses of Proceeds, Para. A.2.d.i (p. 51)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. A, Ch. 3, Para. B, Restrictions on Uses of Proceeds, Paras. B.1 and B.6 (p. 53)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [13 CFR § 120.130](https://www.ecfr.gov/current/title-13/section-120.130)
- [SOP 50 10 8.1, Sec. B, Ch. 4, Para. A.3.b, Seasonal CAPLines (Para. A begins p. 144)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)