For SBA lenders
Short answer
The lender is responsible for independently validating the stated business purpose and ensuring the proposed use of proceeds aligns with eligible SBA 7(a) loan purposes.
SBA Form 1919 requires the borrower to certify the business purpose and how loan funds will be used. The lender cannot simply accept this certification; they must conduct due diligence to confirm the accuracy and eligibility of the stated use of proceeds (e.g., for working capital, equipment, real estate, acquisition) in accordance with SOP 50 10 and 13 CFR Part 120.
A borrower states on Form 1919 that $100,000 of the loan proceeds will be for working capital. The lender reviews the borrower's projections, cash flow analysis, and existing liabilities to confirm that $100,000 is a reasonable and necessary amount for eligible working capital expenses, rather than for ineligible purposes like owner distributions.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SBA Form 1919 - Borrower Information Form
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.
More on required forms (1919, etc.)
Terms in this answer
Pre-qualify your SBA 7(a) deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to fund a deal like yours and flag anything that trips up approval.
Free · No documents · Usually same-day