[Code of Federal Regulations]

[Title 13, Volume 1]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 13CFR123.9]



[Page 345]

 

                TITLE 13--BUSINESS CREDIT AND ASSISTANCE

 

                CHAPTER I--SMALL BUSINESS ADMINISTRATION

 

PART 123_DISASTER LOAN PROGRAM--Table of Contents

 

                           Subpart A_Overview

 

Sec. 123.9  What happens if I don't use loan proceeds for the intended 

purpose?



    (a) When SBA approves each loan application, it issues a loan 

authorization which specifies the amount of the loan, repayment terms, 

any collateral requirements, and the permitted use of loan proceeds. If 

you wrongfully misapply these proceeds, you will be liable to SBA for 

one and one-half times the proceeds disbursed to you as of the date SBA 

learns of your wrongful misapplication. Wrongful misapplication means 

the willful use of any loan proceeds without SBA approval contrary to 

the loan authorization. If you fail to use loan proceeds for authorized 

purposes for 60 days or more after receiving a loan disbursement check, 

such non-use also is considered a wrongful misapplication of the 

proceeds.

    (b) If SBA learns that you may have misapplied your loan proceeds, 

SBA will notify you at your last known address, by certified mail, 

return receipt requested. You will be given at least 30 days to submit 

to SBA evidence that you have not misapplied the loan proceeds or that 

you have corrected any such misapplication. Any failure to respond in 

time will be considered an admission that you misapplied the proceeds. 

If SBA finds a wrongful misapplication, it will cancel any undisbursed 

loan proceeds, call the loan, and begin collection measures to collect 

your outstanding loan balance and the civil penalty. You may also face 

criminal prosecution or civil or administrative action.