For SBA lenders
Short answer
No, SBA 7(a) loan proceeds cannot be used to pay the buyer's salary immediately after closing; salary must be paid from the business's operating cash flow.
SBA loan proceeds are for eligible business purposes, such as acquisition costs, working capital for business operations, equipment, or real estate. Owner's salary is an operating expense that must be funded by the business's generated cash flow, not directly from the loan principal. Working capital can help fund initial operational shortfalls, but not as direct salary disbursement.
A borrower acquires a business with an SBA loan. The loan includes $100,000 for working capital. The borrower cannot write a check from the working capital portion for their first month's salary. Instead, salary is paid from the business's revenue once it generates sufficient cash flow.
Insider move
Lenders must ensure that loan proceeds are used strictly for authorized business purposes. Misuse of funds, such as directly funding owner's salary from the loan, would be a violation of the loan authorization and could jeopardize the SBA guaranty.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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