The NCSL Blog

29

By Erin McMillen

The Small Business Administration (SBA) has issued new guidance easing eligibility restrictions for individuals with a criminal record–one week before the June 30 deadline to apply.

PPP loans remain available until June 30 even for small businesses starting to reopen. GETTYAfter the passage of the Coronavirus Aid, Relief and Economic Security Act, the SBA released guidance regarding who is eligible to apply for the Paycheck Protection Program and Economic Injury Disaster Loan.

April 3 guidance from the SBA disqualified businesses from the PPP, if:

  • An owner of 20% or more of the equity is currently subject to criminal charges, incarceration, probation or parole.
  • In the last five years, “any owner” has been convicted of any felony, pled guilty or no contest to felony charges, or has been placed on pretrial diversion or any form of parole or probation, including probation before judgment, based on felony charges.

The EIDL application asks whether the applicant has "ever been convicted, pled guilty...or been placed on any form of parole or probation." While it is unclear if answering “yes” is disqualifying, the information is evidently taken into consideration during application approval.

Disqualification for the loan due to pretrial diversion status, a low eligibility threshold for those with felony criminal histories and a look-back period of five years barred previously incarcerated individuals from receiving key coronavirus relief assistance for their small businesses. On June 24, the SBA eased financial assistance eligibility to these applicants. These changes include:

  1. Being on parole or probation no longer disqualifies an individual from relief funding. There are two stipulations:
    1. Parole or probation must not have commenced within the last year for any felony.
    2. Parole or probation must not have commenced within the last five years for felonies involving fraud, bribery, embezzlement or a false statement in loan application or application for federal financial assistance.
  2. Pending misdemeanor charges are no longer disqualifying. Pending felony charges are still disqualifying.

 

For more information on EIDL and PPP loans, read NCSL’s small business loans brief.

Erin McMillen is an intern in NCSL’s Law, Criminal Justice and Public Safety Program.

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About the NCSL Blog

This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.