November 13, 2023–Due Process Institute and other organizations submitted comments regarding the Small Business Administration’s (SBA) proposed rule, Criminal Justice Reviews for the SBA Business Loan Programs and Surety Bond Guaranty Program. The proposed rule eliminates existing criminal background requirements for SBA-backed loan and surety programs for small business owners. The only prohibition for access to SBA-backed loan and surety programs would be the incarceration status of the applicant, which would be subject to verification. An applicant who is incarcerated would not be eligible. Applicants would be reviewed for any connection to fraud related to pandemic programs or other federal programs. It does not prevent lenders of SBA-backed loans from conducting their own criminal history background checks of an applicant to determine the risk as long as lenders’ procedures comply with existing law.
The Criminal Justice Reviews for the SBA Business Loan Programs and Surety Bond Guaranty Program Rule proposed by SBA is long overdue and will provide much-needed capital to small business owners who have been impacted by the criminal justice system. Research published by the RAND Corporation found that roughly 4 percent of small business owners have a criminal record and 1.5 percent have a felony record. The initial restrictions published by SBA in April 2020 prohibited more than 140,000 small business owners with a criminal record from participating in the Paycheck Protection Program, impacting more than 212,000 businesses and more than 343,000 employees. Roughly 30 percent of affected small businesses were owned by a person of color. Revisions to the restrictions reduced the number of ineligible business owners with a criminal record to fewer than 18,000.
Due Process Institute applauds the SBA for proposing this rule to provide access to these loan and surety programs to small business owners who have a criminal record. Individuals who have completed the terms of their sentence and paid their debt to society should have the same access to federal programs like those provided by SBA that any other small business owner could receive. That is basic fairness that is missing in our country’s approach to criminal justice. We strongly support the proposed rule and look forward to future efforts from SBA that provide support for small business owners who have been impacted by the criminal justice system.