SBA rules · SOP 50 10 8.1

Can an SBA loan be used to buy land?

Yes, SBA loan proceeds can be used to acquire land as part of an eligible project, but they cannot be used to purchase excess land or land held primarily for future development or investment.

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

In detail

Eligible land acquisition: A borrower may use SBA loan proceeds to acquire land by purchase or lease as part of an eligible project, but purchasing excess land that is not for immediate project use or holding land primarily for future development, sale, or investment is prohibited.
Occupancy for new construction: For new construction on the property, the small business (or Operating Company in an EPC/OC structure) must occupy at least 60% of the Rentable Property, may permanently lease up to 20% to a third party, and may temporarily lease an additional 20% with the intention of using some of it within 3 years and all of it within 10 years.
Occupancy for existing buildings: If the land purchase includes an existing building, the applicant must occupy at least 51% of the Rentable Property and may lease up to 49% to a third party, with no more than 1 year permitted to comply with occupancy requirements.
Construction requirements: The construction of a new building must comply with the National Earthquake Hazards Reduction Program (NEHRP) seismic standards or equivalent local building codes. For 7(a) construction projects over $350,000, the borrower must submit final plans and specifications, execute a firm contract with an acceptable licensed contractor at a specified price, and obtain 100% performance and payment bonds along with builder's risk and workers' compensation insurance, unless a blanket waiver applies through qualified third-party or internal construction management.

The source

What the SOP says

“Acquire land (by purchase or lease) as part of an eligible project;

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

“The purchase of excess land (land that is not for immediate use as part of the project) is not eligible to be funded by SBA loan proceeds;

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > 13 CFR § 120.130 (lines 803-817)✓ Verified

“For an existing building, the Applicant must occupy 51% of the Rentable Property and may lease to a third party up to 49%; or

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > Occupancy and Leasing Requirements (lines 820-826)✓ Verified

“In no case may the small business have more than 1 year to meet occupancy requirements.

SOP 50 10 8.1, Chapter 3: Uses of Proceeds > When the real estate is owned by an EPC: (lines 827-833)✓ Verified

“In the construction of a new building or an addition to an existing building, regardless of whether the project is one that uses an independent licensed contractor or is a “Do-it-yourself” project, Lender must obtain evidence of compliance with the "National Earthquake Hazards Reduction Program Recommended Provisions for the Development of Seismic Regulations for New Buildings" (NEHRP), or a building code that has substantially equivalent provisions.

SOP 50 10 8.1, Chapter 6: SBA Terms and Conditions through Disbursement for all 7(a) Loans > Construction Loan Provisions (lines 2861-2866)✓ Verified

“Evidence that the licensed contractor has furnished a l00% performance bond and labor and materials payment bond and that the contractor carries appropriate Builder’s Risk and Worker’s Compensation Insurance;

SOP 50 10 8.1, Chapter 6: SBA Terms and Conditions through Disbursement for all 7(a) Loans > If the construction component of the 7(a) loan is more than $350,000: (lines 2867-2876)✓ Verified

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