(a) Borrowers must use loan proceeds for a business purpose. Business purposes include, but are not limited to:
  (1) start-up costs;
  (2) working capital;
  (3) franchise fees; and
  (4) acquisition of equipment, inventory, or services used in the production, manufacturing, or delivery of a business's goods or services, or in the purchase, construction, renovation, or tenant improvements of an eligible place of business that is not for passive real estate investment purposes.
(b) Loan proceeds shall not be used for:
  (1) acquiring or holding passive investments in real estate;
  (2) the purchase of owner-occupied residential housing;
  (3) the construction, improvement, or purchase of residential housing that is owned or to be owned by the Borrower;
  (4) the purchase of real property that is intended for resale or not used for the business operations of the Borrower;
  (5) the purchase of securities;
  (6) lobbying activities;
  (7) the purchase of good will;
  (8) inside bank transactions;
  (9) repayment of delinquent federal or state income taxes unless the Borrower has a payment plan in place with the relevant taxing authority;
  (10) repayment of taxes held in trust or escrow;
  (11) reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business' continuance;
  (12) purchase of any portion of the ownership interest of any owner of the Borrower, such as the acquisition of shares of a company or the partnership interest of a partner when the proceeds of the Enrolled Loan will go to any existing owner or partner of the Borrower;
  (13) refinance of any portion of a loan enrolled in another credit enhancement or credit insurance program not encompassed by 10 T.A.C. Chapter 200;
  (14) a loan in which any Principal of a Borrower has been convicted of a sex offense against a minor as such terms are defined 34 U.S.C. 20911; or
  (15) a loan that is contrary to federal or state law or policy.

Source Note: The provisions of this §200.106 adopted to be effective June 25, 2023, 48 TexReg 3217