SBA 7(a) Q&A
Short answer
Generally, no, working capital from an SBA 7(a) loan cannot be used to pay off existing business debts of the acquired company unless those debts are specifically approved for refinancing as part of the acquisition.
Working capital is intended for future operational expenses, not for paying off existing debts. If the buyer intends to pay off existing business debts, those must be explicitly underwritten and approved as a refinancing component within the SBA loan application. Unapproved debt refinancing using working capital funds is a misuse of loan proceeds.
If the acquired business has $10,000 in outstanding credit card debt, and your SBA loan includes $50,000 for general working capital, you cannot use the $50,000 to pay off the $10,000 credit card debt unless the credit card debt was specifically listed and approved for refinancing in the SBA loan authorization.
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
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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