[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR120.120]

[Page 218]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 120--BUSINESS LOANS--Table of Contents
 
           Subpart A--Policies Applying to All Business Loans
 
Sec. 120.120  What are eligible uses of proceeds?

    A small business must use an SBA business loan for sound business 
purposes. The uses of proceeds are prescribed in each loan's 
Authorization.
    (a) A Borrower may use loan proceeds from any SBA loan to:
    (1) Acquire land (by purchase or lease);
    (2) Improve a site (e.g., grading, streets, parking lots, 
landscaping), including up to 5 percent for community improvements such 
as curbs and sidewalks;
    (3) Purchase one or more existing buildings;
    (4) Convert, expand or renovate one or more existing buildings;
    (5) Construct one or more new buildings; and/or
    (6) Acquire (by purchase or lease) and install fixed assets (for a 
504 loan, these assets must have a useful life of at least 10 years and 
be at a fixed location, although short-term financing for equipment, 
furniture, and furnishings may be permitted where essential to and a 
minor portion of the 504 Project).
    (b) A Borrower may also use 7(a) and microloan proceeds for:
    (1) Inventory;
    (2) Supplies;
    (3) Raw materials; and
    (4) Working capital (if the Operating Company is a co-Borrower with 
an Eligible Passive Company, part of the loan proceeds may be applied 
for working capital if used for that purpose only by the Operating 
Company).
    (c) A Borrower may use 7(a) loan proceeds for refinancing certain 
outstanding debts.