# 13 CFR § 123.9: What happens if I don't use loan proceeds for the intended purpose?

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/ecfr-13-123.9

## Section

- **Citation:** 13 CFR § 123.9
- **Heading:** What happens if I don't use loan proceeds for the intended purpose?
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** September 22, 2026
- **Source:** Publisher's official text
- **Location:** Title 13—Business Credit and Assistance > CHAPTER I—SMALL BUSINESS ADMINISTRATION > PART 123—DISASTER LOAN PROGRAM > Subpart A—Overview

## Text

(a) For disaster loans authorized under Section 7(b), when SBA approves each application, it issues a loan authorization which specifies the amount of the loan, repayment terms, any collateral requirements, and the permitted use of loan proceeds. If you wrongfully misapply the proceeds of a disaster loan authorized under Section 7(b), you will be liable to SBA for one and one-half times the proceeds disbursed to you as of the date SBA learns of your wrongful misapplication. Wrongful misapplication means the willful use of any loan proceeds without SBA approval contrary to the loan authorization. If you fail to use loan proceeds for authorized purposes for 60 days or more after receiving a loan disbursement check, such non-use also is considered a wrongful misapplication of the proceeds.
(b) If SBA learns that you may have misapplied your loan proceeds from a disaster loan authorized under Section 7(b), SBA will notify you at your last known address, by certified mail, return receipt requested. You will be given at least 30 days to submit to SBA evidence that you have not misapplied the loan proceeds or that you have corrected any such misapplication. Any failure to respond in time will be considered an admission that you misapplied the proceeds. If SBA finds a wrongful misapplication, it will cancel any undisbursed loan proceeds, call the loan, and begin collection measures to collect your outstanding loan balance and the civil penalty.
(c) If you misapply loan proceeds of any disaster loan under this Part, including an IDAP loan, you may face criminal prosecution or civil or administrative action.
[61 FR 3304, Jan. 31, 1996, as amended at 75 FR 60598, Oct. 1, 2010]

## Nearby sections

- [13 CFR § 123.1 § 123.1 What do these rules cover?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.1.md)
- [13 CFR § 123.2 § 123.2 What are disaster loans and disaster declarations?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.2.md)
- [13 CFR § 123.3 § 123.3 How are disaster declarations made?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.3.md)
- [13 CFR § 123.4 § 123.4 What is a disaster area and why is it important?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.4.md)
- [13 CFR § 123.5 § 123.5 What kinds of loans are available?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.5.md)
- [13 CFR § 123.6 § 123.6 What does SBA look for when considering a disaster loan applicant?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.6.md)
- [13 CFR § 123.7 § 123.7 Are there restrictions on how disaster loans can be used?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.7.md)
- [13 CFR § 123.8 § 123.8 Does SBA charge any fees for obtaining a disaster loan?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.8.md)
- [13 CFR § 123.9 § 123.9 What happens if I don't use loan proceeds for the intended purpose?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.9.md)
- [13 CFR § 123.10 § 123.10 What happens if I cannot use my insurance proceeds to make repairs?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.10.md)
- [13 CFR § 123.11 § 123.11 Does SBA require collateral for any of its disaster loans?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.11.md)
- [13 CFR § 123.12 § 123.12 Are books and records required?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.12.md)
- [13 CFR § 123.13 § 123.13 What happens if my loan application is denied?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.13.md)
- [13 CFR § 123.14 § 123.14 How does the Federal Debt Collection Procedures Act of 1990 apply?](https://www.frixlaw.com/law-library/statutes/ecfr-13-123.14.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/ecfr-13-123.9. Check the current official text before relying on it. Not legal advice.