{"ok":true,"canonical_url":"https://dealroom.so/glossary/misapplication-of-loan-proceeds","api_url":"https://dealroom.so/api/public/glossary/misapplication-of-loan-proceeds","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"misapplication-of-loan-proceeds","term":"Misapplication of loan proceeds","group":"The loan itself","definition":"This is when loan funds are used for something other than what the SBA Loan Authorization specifies. If you divert funds, it's a serious violation that can lead to loan default and personal liability.","what_it_means":"The SBA requires strict adherence to the authorized Use of proceeds. Ensure every dollar is traceable to approved uses like working capital, equipment purchase, or debt refinancing. Any deviation, even minor, can trigger a loan default and potentially expose you to fraud allegations.","url":"https://dealroom.so/glossary/misapplication-of-loan-proceeds","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"},{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"}],"related":[{"slug":"use-of-proceeds","term":"Use of proceeds","url":"https://dealroom.so/glossary/use-of-proceeds"},{"slug":"sba-loan-authorization","term":"SBA Loan Authorization","url":"https://dealroom.so/glossary/sba-loan-authorization"},{"slug":"loan-default","term":"Loan default","url":"https://dealroom.so/glossary/loan-default"},{"slug":"personal-guarantee","term":"Personal guarantee","url":"https://dealroom.so/glossary/personal-guarantee"}],"related_questions":[{"question":"Can I use proceeds from selling my primary residence as part of my equity injection?","url":"https://dealroom.so/sba-7a/questions/can-i-use-proceeds-from-selling-my-primary-residence-as-part-of-my-equity-injection"},{"question":"Can I use proceeds from the sale of personal crypto assets for my equity injection?","url":"https://dealroom.so/sba-7a/questions/can-i-use-proceeds-from-the-sale-of-personal-crypto-assets-for-my-equity-injection"},{"question":"What are a lender's responsibilities concerning the proper use of 7(a) loan proceeds by the borrower?","url":"https://dealroom.so/for-lenders/questions/what-are-a-lender-s-responsibilities-concerning-the-proper-use-of-7-a-loan-proceeds-by-the"},{"question":"Can I use proceeds from selling personal real estate as part of my SBA 7(a) equity injection?","url":"https://dealroom.so/sba-7a/questions/can-i-use-proceeds-from-selling-personal-real-estate-as-part-of-my-sba-7-a-equity-injectio"},{"question":"How does a lender ensure compliance with the 'use of proceeds' requirements for a 7(a) loan, particularly for working capital?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-ensure-compliance-with-the-use-of-proceeds-requirements-for-a-7-a-loan-p"},{"question":"Are proceeds from personal investment sales eligible for equity injection?","url":"https://dealroom.so/sba-7a/questions/are-proceeds-from-personal-investment-sales-eligible-for-equity-injection"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Misapplication of loan proceeds","url":"https://dealroom.so/glossary/misapplication-of-loan-proceeds","source_type":"DealRoom Data"}}