13 CFR § 120.352 - Use of proceeds.

---
identifier: "/us/cfr/t13/s120.352"
source: "ecfr"
legal_status: "authoritative_unofficial"
title: "13 CFR § 120.352 - Use of proceeds."
title_number: 13
title_name: "Business Credit and Assistance"
section_number: "120.352"
section_name: "Use 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"
---


# 120.352 Use of proceeds.

Loan proceeds may be used for:

(a) *Qualified employee trust.* A qualified employee trust may use loan proceeds for two purposes:

(1) *Qualified employer securities.* A qualified employee trust may relend loan proceeds to the employer by purchasing qualified employer securities. The small business concern may use these funds for any general 7(a) purpose.

(2) *Control of employer.* A qualified employee trust may use loan proceeds to purchase a controlling interest (51 percent) in the employer. Ownership and control must vest in the trust by the time the loan is repaid.

(b) *Small business concern.* A small business concern may only use loan proceeds to make a loan to a qualified employee trust that results in the qualified employee trust owning at least 51 percent of the small business concern.

[87 FR 38908, June 30, 2022]