SBA Proposes Rule to Empower Justice-Involved Entrepreneurs by Removing Loan Barriers

The U.S. Small Business Administration (SBA) proposes a groundbreaking rule change. The SBA is opening up discussions on a rule to enhance access to SBA loans for individuals with specific criminal records. The reform is a strategic move, echoing President Biden’s Safer America Plan, which targets root causes of crime and violence, such as unemployment and lack of opportunities.

The SBA’s regulations currently create hindrances for loan aspirants with certain criminal backgrounds. Due to these stipulations, some are completely excluded from accessing SBA programs. However, the proposed rule, if enacted, would overhaul this framework. It promises to increase access to essential capital for these entrepreneurs by broadening eligibility criteria and dismantling pre-existing barriers within SBA’s loan and surety bond programs.

A crucial aspect of the proposal is the removal of queries regarding an applicant’s criminal justice involvement from SBA forms. This change arises from the acknowledgment that no tangible evidence suggests those with prior criminal involvements are more susceptible to defaulting on their loans. Further, studies indicate that posing such questions can deter eligible applicants from even initiating the loan process.

Nevertheless, to ensure the system’s integrity, the rule will uphold restrictions against those presently incarcerated or those found guilty of defrauding the government.

Administrator Isabella Casillas Guzman passionately noted, “America is about possibilities and second chances – including justice-involved individuals who are working hard to rebuild their lives through entrepreneurship.”

The implications of this proposed rule cannot be overstated. With one in three American adults having a criminal record, employment remains their paramount necessity and obstacle. A 2018 study highlighted the grim reality: ex-inmates face a staggering 27% unemployment rate. Entrepreneurship, therefore, presents a beacon of hope for those seeking to rebuild their lives after serving their sentences, especially since obtaining regular employment remains a significant challenge.

Among the significant modifications within the proposed rule change are:

A standardized set of eligibility criteria across various SBA capital programs.
Removal of ambiguous terms like “crime of moral turpitude.”
The introduction of a straightforward approach to verifying an applicant’s incarceration status.
SBA’s commitment to protecting against fraudulent activities by leveraging third-party databases for independent verification.

Senator Cory Booker (D-NJ) voiced his support, praising the SBA’s effort to dismantle the barriers that previously restrained justice-involved individuals from accessing the resources vital for their entrepreneurial pursuits.

Senator Ben Cardin (D-MD) and Congresswoman Nydia M. Velázquez (D-NY) echoed these sentiments, emphasizing the transformative power of entrepreneurship for returning citizens.

In essence, this proposed rule champions the belief that everyone deserves a shot at the American dream. By bolstering access to capital for entrepreneurs with criminal histories, the SBA promotes economic growth and plays a pivotal role in fostering a safer, more equitable America.

While these changes mark significant progress, it’s crucial to note that the onus of safeguarding against fraud still remains. As of August 1, 2023, the SBA inaugurated a stringent protocol to pre-screen all business loan applications for potential fraud. These protocols will remain untouched by the proposed changes.

In championing entrepreneurship, the SBA is fortifying the nation’s economic fabric. With such reforms, America ensures an equitable entrepreneurial landscape, turning the page towards a brighter, more inclusive future.

Image: Envato Elements

This article, “SBA Proposes Rule to Empower Justice-Involved Entrepreneurs by Removing Loan Barriers” was first published on Small Business Trends