SBA rules · SOP 50 10 8.1

Can an SBA loan be used to buy equipment?

Yes, both 7(a) and 504 loan proceeds may be used to acquire and install machinery and equipment, subject to program-specific rules and maturity limits.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

General eligibility: A borrower may use proceeds from any SBA loan to acquire (by purchase or lease) and install fixed assets, including machinery and equipment.
504 program requirements: For 504 loans, eligible costs include the purchase, transportation, dismantling, or installation of machinery and equipment, which must be at a fixed location and have a useful life of at least 10 years.
7(a) loan maturities: Under 7(a), equipment loans generally should not exceed 10 years, though the maturity may extend up to 15 years if supported by the IRS asset class useful life, plus an additional period not to exceed 12 months when necessary for installation.
Working capital and revolving lines: Certain short-term and revolving facilities, including Contract CAPLines and Export Working Capital Program (EWCP) loans, explicitly prohibit using loan proceeds to acquire fixed assets.

The source

What the SOP says

“Acquire (by purchase or lease) and install fixed assets (for a 504 loan, these assets must have a useful life of at least 10 years and be at a fixed location, although short-term financing for equipment, furniture, and furnishings may be permitted where essential to and a minor portion of the 504 Project);

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > Eligible Uses of Proceeds (lines 763-772)✓ Verified

“All costs associated with the purchase, transportation, dismantling or installation of machinery and equipment;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Machinery and Equipment (lines 3170-3173)✓ Verified

“The machinery and equipment must have a useful life of at least 10 years;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Machinery and Equipment (lines 3170-3173)✓ Verified

“Generally, equipment, fixtures, or furniture loans should not exceed 10 years. However, the term may be up to 15 years if the IRS asset class useful life supports the term. The term for a loan to finance equipment and/or leasehold improvements may include an additional reasonable period, not to exceed 12 months, when necessary to complete the installation of the equipment and/or complete the leasehold improvements.

SOP 50 10 8.1, Appendix 17: 7(a) Loan Maturity Requirements > General Requirements (lines 5377-5383)✓ Verified

“To acquire fixed assets;

SOP 50 10 8.1, Chapter 4: 7(a) CAPLines > Contract CAPLine proceeds may not be used: (lines 2018-2029)✓ Verified

“Acquire fixed assets or capital goods for use in the Borrower’s business;

SOP 50 10 8.1, Chapter 5: 7(a) Export Trade Finance > Loan proceeds may not be used to (13 CFR § 120.342): (lines 2579-2586)✓ Verified

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