13 CFR § 120.130 - Restrictions on uses of proceeds.

---
identifier: "/us/cfr/t13/s120.130"
source: "ecfr"
legal_status: "authoritative_unofficial"
title: "13 CFR § 120.130 - Restrictions on uses of proceeds."
title_number: 13
title_name: "Business Credit and Assistance"
section_number: "120.130"
section_name: "Restrictions on uses of proceeds."
chapter_name: "SMALL BUSINESS ADMINISTRATION"
part_number: "120"
part_name: "BUSINESS LOANS"
positive_law: false
currency: "2026-04-05"
last_updated: "2026-04-05"
format_version: "1.1.0"
generator: "[email protected]"
authority: "15 U.S.C. 634(b) (6), (b) (7), (b) (14), (h), and note, 636(a), (h) and (m), 650, 687(f), 696(3) and (7), and 697(a) and (e); sec. 521, Pub. L. 114-113, 129 Stat. 2242; sec. 328(a), Pub. L. 116-260, 134 Stat. 1182."
regulatory_source: "61 FR 3235, Jan. 31, 1996, unless otherwise noted."
cfr_part: "120"
---


# 120.130 Restrictions on uses of proceeds.

SBA will not authorize nor may a Borrower use loan proceeds for the following purposes (including the replacement of funds used for any such purpose):

(a) Payments, distributions, or loans to Associates of the applicant (except for ordinary compensation for services rendered or to facilitate changes of ownership in accordance with § 120.202);

(b) Refinancing a debt owed to a Small Business Investment Company (“SBIC”) or a New Markets Venture Capital Company (“NMVCC”);

(c) Floor plan financing or other revolving line of credit, except under § 120.340 or § 120.390;

(d) Investments in real or personal property acquired and held primarily for sale, lease, or investment (except for a loan to an Eligible Passive Company or to a small contractor under § 120.310);

(e) The applicant may not use any of the proceeds to pay past-due Federal, state, or local payroll taxes, sales taxes, or other similar taxes that are required to be collected by the applicant and held in trust on behalf of a Federal, state, or local government entity.

(f) A purpose which does not benefit the small business; or

(g) Any use restricted by §§ 120.201 and 120.884 (specific to 7(a) loans and 504 loans respectively).

[61 FR 3235, Jan. 31, 1996, as amended at 76 FR 9218, Feb. 17, 2011; 76 FR 63545, Oct. 12, 2011; 82 FR 39502, Aug. 21, 2017; 85 FR 7648, Feb. 10, 2020; 85 FR 80588, Dec. 14, 2020; 88 FR 21085, Apr. 10, 2023]