Uses of SBA Loans Funds


Under the guidelines of the SBA programs, loan funds must be used for specific purposes. The purposes may vary from loan to loan. Here is an overview of how money can be used when obtaining a loan that is guaranteed and backed by the SBA.

Owner Occupied Commercial Real Estate Acquisition

Construction and Improvements

Partner Buyouts

Furniture Fixtures and Equipment

Working Capital


Refinance / debt restructuring

Business Acquisition

Business Start-ups
Owner Occupied Commercial Real Estate Acquisition: This loan is for small businesses that want to buy a building they will occupy with their business. To be considered an owner occupied commercial real estate acquisition, a business must occupy 51% of the available space for business use.

Construction and Improvements: Funds can also be used to make improvements to a building or office space where a small business has its base of operation. This includes construction and expansion, conversion, refurbishment and modernization of the business premises, repair and /or replacement of plumbing and electrics, doors and windows including full redecoration.

Partner Buyouts: The SBA also allows funds to be used by a business owner to buy the business from a partner. If business partners have differences with one another, if one of them dies or becomes disabled, is no longer interested in the business or one partner’s shares are lost because of bankruptcy proceedings, then the remaining partner(s) can buy the other partners’ shares using an SBA loan.

Furniture Fixtures and Equipment: SBA loans can also be used to buy equipment, machinery, furniture or fixtures, supplies, or materials that the business may need to operate. Depending on the type of business, it allows for the purchase of any furniture, fixtures or equipment that the business may need to operate on a daily basis such as manufacturing machinery and equipment, conveyors, vehicles, chairs, tables, registers, ovens, coffee makers and lighting.

Working capital: Working capital is the cash needed to operate the business from day to day. Examples of working capital include capital to pay for insurance, utility bills, payroll and anything to do with the day to day operations of business. An SBA loan can be obtained in order to increase short term working capital needs like seasonal financing needs, contract performance, construction financing, export production, and for financing against existing inventory and receivable under special conditions as well as medium to long term working capital.

Inventory: An SBA loan can used to buy the inventory which is needed for the operation of the business but this is not applicable to the 504 program.

Refinance/ debt restructuring: An SBA loan can be used to pay off an existing debt of the company which is not already structured with reasonable terms and conditions. This is not applicable under the SBA 504 program.

Business Acquisition: Funds can be used to buy an existing business from its current owner, such as the purchase of an existing eligible business or the purchase of an existing franchise operation.

Business Startups: Funds can also be used to cover the startup costs of creating or starting a new business which includes all of the above uses including the purchase of owner occupied commercial real estate, constructions and improvements, furniture fixtures and equipment, working capital and inventory.