WASHINGTON –Today, the U.S. Small Business Administration (SBA) invited public comment on a proposed rule that would help expand access to SBA loan programs for people with certain criminal history records. These proposed reforms would open up entrepreneurship opportunities to the one in three American adults with a prior criminal history record and build upon President Biden’s comprehensive Safer America Plan to prevent and combat gun violence and crime by addressing their root causes through expanding access to employment, education, health care, housing, and other supportive services that strengthen public safety and advance equity. As the SBA expands access to capital to more qualified entrepreneurs, it continues to implement additional reforms to mitigate the risk of fraud in its traditional capital programs to ensure funds get to the businesses they were intended to serve, including front-end detection protocols conducted by SBA. These safeguards further strengthen the existing ones set and implemented by lenders allowing for expansion of capital with speed and certainty.
Current SBA regulations contain barriers for loan applicants with certain criminal history records, with some applicants barred entirely from SBA programs. If finalized, the proposed rule would expand access to capital for entrepreneurs with prior justice involvement by expanding eligibility and removing barriers to SBA’s loan and surety bond programs. The proposed rule would also eliminate the current practice on SBA application forms of asking all applicants about their involvement with the criminal justice system. This is because there is no evidence that people with prior criminal justice system history are at a greater risk of default. In fact, research shows that asking applicants about this history can deter people from applying for SBA loans, even though they would not be categorically barred from obtaining those loans. At the same time, the proposed rule would maintain prohibitions on applicants who are currently incarcerated or are found to have previously defrauded the government based on SBA cross-checks with available databases would remain ineligible for SBA-guaranteed loans.
“America is about possibilities and second chances – and that includes justice-involved individuals who are working hard to rebuild their lives through entrepreneurship,” said Administrator Isabella Casillas Guzman. “SBA’s proposed rule would help returning citizens have better access to capital to start and grow their businesses and ensure our economy and society can benefit from their pursuit of the American dream of business ownership. Doing so is not only the right thing to do to strengthen our economy and communities, but it is also the smart thing to do because research shows that employment helps people thrive during reentry and reduces the risk of recidivism.”