Posted May 5, 2020
As many small business owners are looking for relief with Small Business Administration (SBA) loans and relief through the CARES Act, there is a certain portion of the population who has been excluded from relief–former felons.
According to an article by Law360, those who have a previous criminal background have an X on their back, unable to receive government funds due to eligibility restrictions. This is a problem though, as many formerly incarcerated individuals look towards entrepreneurship as a way to make a living after serving their sentences. But when there is no relief available for them when a global pandemic strikes, a vicious cycle begins.
Studies have shown that one in three Americans have a criminal record. For those individuals who do, what relief exists for them to continue their businesses and keep employees on the payroll?
A former attorney-adviser with the Small Business Administration explains that a criminal background should not automatically prevent someone from receiving relief. In fact, those individuals should be permitted to fill out a personal history statement about what happened, then be approved or denied based upon the statement.
That differs from the SBA Paycheck Protection Program under the COVID-19 relief as there is not an option to explain your past. The application asks, “business owners whether they or anyone owning 20% or more of the business are currently subject to “an indictment, criminal information, or arraignment,” or incarcerated, on probation or on parole.”
Furthermore, the application requires applicants to “confirm that they haven’t had a felony conviction, guilty plea or related pretrial diversion program, or been placed on any form of parole or probation, in the past five years.”
By answering yes, the application is denied.
These SBA loans and grants are not the only ones that discriminate against former felons. The Economic Injury Disaster Loans grants also ask criminal record questions. The form asks the application whether they have “ever been convicted, pled guilty … or been placed on any form of parole or probation.”
While representatives from the SBA say applicants should be contacted for more information if they answer yes to any criminal background questions, many report they have not heard anything or have simply been denied.
Groups like the American Civil Liberties Union and the Justice Action Network have joined forces with other advocacy groups to remove this discriminatory restriction, even suggesting lawsuits.
These restrictions on COVID-19 relief for small business owners specifically impacts those who have been incarcerated in the last 10 years, but setting a time limit is challenging, especially for those who have unrelated offenses such as drug crimes, which do not relate to business fraud activity.
Some argue that had the restrictions been placed on those with business fraud, the limitations would have been more reasonable from a standpoint of expediting the loan process.
But for those with a criminal background, the reality that they may not be able to keep their businesses once COVID-19 outbreaks cease is a harsh reality that they must face.
If you have a prior criminal record and have been denied loans and grants via SBA COVID-19 relief, contact us. We are working with attorneys across the country to evaluate the discriminatory actions of those organizations.
Posted in COVID-19.