# What can you not use an SBA loan for?

**Short answer:** SBA loans cannot fund floor plan financing, investment property, past-due trust taxes or SBIC debt. They also cannot pay most owner distributions or a creditor positioned to take a loss. The full list is 13 CFR 120.130 and SOP 50 10 8.1, Sec. A, Ch. 3, Para. B.

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Last checked: 2026-11-09

In this answer, SBIC means Small Business Investment Company.

SBA bars eleven categories of use in Section A, Chapter 3, Paragraph B of SOP 50 10 8.1, which applies 13 CFR 120.130. The bar also covers replacing funds you already used or borrowed for one of these purposes.

- Payments, distributions or loans to an Associate of the business, except fair pay for services actually rendered and eligible changes of ownership
- Refinancing a debt owed to a Small Business Investment Company or a New Markets Venture Capital Company
- Floor plan financing
- Revolving lines of credit, except under SBA Express, CAPLines, Export Working Capital Program (EWCP), Manufacturers' Access to Revolving Credit (MARC) and Export Express
- Real or personal property held primarily for future development, sale, lease or investment, including excess land
- Past-due payroll, sales or similar trust taxes
- For 504 loans, relocating out of a community with a one-third net workforce cut or a substantial rise in unemployment, absent Certified Development Company (CDC) justification
- Paying a creditor in a position to sustain a loss that would shift to SBA
- Any purpose that does not benefit the small business, including a loan for an affiliated business
- A commercial property assessed clean energy (C-PACE) loan on a property that has or will have a 7(a) or 504 loan
- Any use restricted by 13 CFR 120.201 or 120.884

Some programs add limits. A Contract CAPLine cannot fund permanent working capital or fixed assets (Sec. B, Ch. 4, Para. A.2.b). A 504 loan cannot fund working capital, franchise fees or advertising (13 CFR 120.884(d)). Inventory is limited to 7(a) loans and microloans (13 CFR 120.120(b)).

A loan cannot carve out a slice for an ineligible purpose either. No part of a 7(a) loan may be guaranteed at zero percent (App. 16, Para. A).

## Sources

- [SOP 50 10 8.1, Sec. A, Ch. 3, Para. B, Restrictions on Uses of Proceeds, Paras. B.1-B.11 (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)
- [13 CFR § 120.201](https://www.ecfr.gov/current/title-13/section-120.201)
- [13 CFR § 120.884](https://www.ecfr.gov/current/title-13/section-120.884)
- [SOP 50 10 8.1, Sec. B, Ch. 4, Para. A.2.b, Contract CAPLines (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)
- [SOP 50 10 8.1, App. 16, Para. A, General Requirements, Zero Percent Guaranty (p. 387)](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 § 120.120](https://www.ecfr.gov/current/title-13/section-120.120)