Glossary · The loan itself
Impermissible Distribution
In short
This refers to taking money out of the business, such as owner's draws or dividends, that violates the terms of your SBA loan agreement. It's a serious breach that can jeopardize your loan.
What it means in a deal
Your SBA loan agreement will likely have covenants restricting distributions from the business, especially in the early years. The SBA wants cash flow to go towards debt service and business growth, not into your personal pocket prematurely. Violating this can lead to a default and puts your personal guarantee at risk.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Impermissible Distribution
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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