*NEW POST (Jan. 21, 2021): Applying for SBA COVID-19 relief with a criminal record in 2021

On this page, we collected a variety of materials on the restrictions related to arrest or conviction imposed by the Small Business Administration (SBA) on small business owners seeking relief under the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program during 2020. Included are proposed reform legislation, lawsuits filed, academic studies, letters from legislators and major organizations, articles by us and by others, and official documents related to this issue. (For more current information, see: Applying for SBA COVID-19 relief with a criminal record in 2021.)

After the first COVID-19 relief bill in March 2020, the CARES Act, the SBA imposed broad criminal history restrictions on applicants. Following the introduction of a bipartisan Senate bill, Treasury Secretary Steven Mnuchin agreed on June 10, 2020, to revise the PPP restrictions.  On June 12, 2020, SBA issued new regulations and applications forms to ease some of the barriers in the PPP.  On June 24, 2020, the SBA further relaxed its criminal history barriers for PPP assistance, this time in a far more significant fashion, and in a manner that makes the business owners who are suing the SBA now eligible to apply.  The new regulation and application form came less a week before the June 30, 2020 deadline to apply for relief.

Meanwhile, two lawsuits were filed against the SBA in federal court in Maryland, asserting that the SBA’s criminal history restrictions are beyond the agency’s authority, arbitrary and capricious, and contrary to the text of the CARES Act; the second lawsuit also asserts that the restrictions fall hardest on minority businesses due to the impact of over-criminalization on communities of color.  On June 29, 2020, a federal judge ruled that the SBA’s criminal history restrictions on PPP, except for the June 24 policy change, were likely unlawful.  The court extended the deadline to apply, but only for the small business owners who had sued.

In a dramatic finale, Congress extended the PPP application deadline to August 8, 2020 for everyone.  This extension, signed into law on July 4, gave business owners made eligible under the June 24, 2020 policy a meaningful opportunity to learn about their eligibility and complete the application process.

Proposed Reform Legislation

• Paycheck Protection Program Second Chance Act
• Fair Chance for Small Business Relief Act
• HEROES Act

Lawsuits

• MoveCorp, et al. v. U.S. Small Business Administration, et al., 1:20-cv-01739 (D.D.C., filed June 25, 2020)
• Carmen’s Corner Store, et al. v. U.S. Small Business Administration, et al., 1:20-cv-01736 (D. Md., filed June 10, 2020)
• Defy Ventures, Inc., et al. v. U.S. Small Business Administration, et al., 1:20-cv-01838 (D. Md., filed June 16, 2020)

Academic Studies

• Criminal Disqualifications in the Paycheck Protection Program, University of Michigan Institute for Social Research (June 2020)

Letters from Legislators

• Letter to the head of the SBA from Rep. Dina Titus and 15 other Members of Congress (May 19)
• Letter to heads of the U.S. Treasury and SBA from Senator Rob Portman and Senator Ben Cardin, Ranking Member of the Senate Small Business Committee (April 30)
• Letter to PA Congressional Delegation from 21 PA legislators (April 24)
• Letter to Congressional Leadership from Rep. Joe Kennedy III and Rep. Joyce Beatty (April 17)
• Letters to Congressional Leadership and heads of the U.S. Treasury and SBA from Senator Jeffrey A. Merkley (April 8)
• Letter to heads of the U.S. Treasury and SBA from Rep. Cedric L. Richmond and 10 other Members of Congress (April 6)

Letters from Major Organizations

• Comment on PPP Interim Final Rule by the Collateral Consequences Resource Center and 25 other organizations (May 15)
• Comment on PPP Interim Final Rule by the Institute for Justice Clinic on Entrepreneurship (May 15)
• Comment on PPP Interim Final Rule by the National Center for Transgender Equality (May 15)
• Comment on PPP Interim Final Rule by Citizens for Juvenile Justice and 37 other organizations (May 15)
• Letter to Congressional leadership from the Ethics & Religious Liberty Commission (May 7)
• Comment on PPP Interim Final Rule by Americans for Prosperity Foundation (April 23)
• Letter to Senator Marco Rubio from leaders of nine evangelical and Catholic organizations (April 20)
• Letter to Congressional Leadership and heads of the U.S. Treasury and SBA from nine conservative organizations (April 20) and Letter to the President (April 21)
• Letter to Senate Leader Mitch McConnell from national and Kentucky-based groups (April 20)
• Joint Statement by the Council of State Governments Justice Center and 12 other groups (April 16)
• Letter to head of SBA from Florida Rights Restoration Coalition (April 10)
• Letter to heads of the U.S. Treasury and SBA from bipartisan group of civil rights, advocacy, and business organizations, including CCRC (April 17) and Letter to Congress (April 10; updated April 17)

CCRC Articles

• SBA throws in the towel and Congress extends the PPP deadline (July 7)
• SBA rolls back many criminal history barriers just before deadline (June 24)
• SBA eases some criminal history barriers and faces litigation (June 16)
• Senate bill would deliver relief to small biz owners with a record (June 5)
• New efforts to channel federal relief to small business owners with a record (May 20)
• Is SBA denying disaster relief based only on an arrest? (May 6)
• Mnuchin defends record restrictions for SBA stimulus loans (April 22)
• Second Chance Small Businesses Deserve Another Chance (April 21)
• SBA has no excuse for excluding people with a record from stimulus relief (April 20)
• At a Glance: Barriers to the Paycheck Protection Program (‘PPP’) Based on Arrest or Conviction (April 16)
• SBA’s bumpy guidance on criminal history requirements for stimulus loans (April 3)
• Applying for an SBA loan with a criminal record (March 27)

Official Documents

• 15 U.S.C. §§ 636(a), (b)
• CARES Act
• Paycheck Protection Program and Health Care Enhancement Act
• S.4116 (“A bill to extend the authority for commitments for the paycheck protection program….”)
• Paycheck Protection Program
  • Additional Revision to the First Interim Final Rule
  • Revisions to First Interim Final Rule
  • Interim Final Rule
  • Application Form (rev. June 24)
  • Application Form (rev. June 12)
  • FAQs
  • 13 CFR 120.110
  • 13 CFR 120.150
  • Standard Operating Procedures (SOP) 50 10 5(K)
• SBA’s Economic Injury Disaster Loan program
  • P.L. 90-448, 1106(e), Department of Housing and Urban Development (HUD) Act of 1968
  • 13 CFR 123.301
  • 13 CFR 123.101
  • 13 CFR 123.6
  • SOP 50 30 9

Other Articles

• Denied U.S. economic relief because of criminal record, Baltimore electrician challenged the system, Baltimore Sun (July 6)
• Court: Hagerstown shop owner, ex-con, can seek PPP loan, Daily Record (July 6)
• PPP Loans: What You Need to Know About the Latest Changes, WSJ (July 6)
• Local business owner sees PPP change just in time for $200,000 loan, WCPO (July 3)
• Biz Owners Barred For Criminal Past Win PPP Extension, Law 360 (June 30)
• Court Rules SBA PPP Loan Application Barring Eligibility from Business Owners with Criminal Records Unlawful, ACLU (June 30)
• NCLA Court Win Keeps SBA from Rewriting CARES Act to Exclude Small Biz Owners on Probation (June 30)
• Court rules that former SBA rules barring business owners with criminal records from aid were illegal, extends deadline for our client, Public Interest Law Center (June 29)
• New Guidance From SBA Eliminates Some Eligibility Requirements for Criminal Records, NCSL (June 29)
• Small Business Owners with Criminal Records Sue Over Pandemic Aid Restrictions, Route 50 (June 17)
• Formerly Incarcerated Businessowners Sue SBA For Denying Them COVID-19 Emergency Loans, Appeal (June 17)
• Trump Administration Sued for ‘Destructive’ Denial of Covid-19 Relief Loans to Small Business Owners With Criminal Records, Common Dreams (June 17)
• Entrepreneurs with criminal records illegally refused Cares Act relief, lawsuit says, Washington Post (June 17)
• SBA Sued Over Rule Barring Convicted Felons From PPP Loans, WSJ (June 16)
• Civil rights groups sue Small Business Administration over PPP loans, CBS (June 16)
• ACLU sues to stop SBA from denying PPP loans to people with criminal records, Yahoo (June 16)
• In face of lawsuit, SBA broadens loan program to more recent felons, Newsday (June 15)
• U.S. eases criminal record provision in coronavirus business loan program, AP (June 12)
• Criminal record shouldn’t bar small businesses from COVID-19 payroll loans, suit says, McClatchy (June 12)
• The Coronavirus Stimulus Discourages Aid to Small Business Owners With a Criminal Record, Intercept (June 8)
• Bipartisan Bill Seeks PPP Access Despite Criminal Records, Law360 (June 5)
• Support the Paycheck Protection Program Second Chance Act, S. 3865, FreedomWorks (June 5)
• Justice Action Network Applauds Bipartisan Senate Coalition Introducing “Paycheck Protection Program Second Chance Act”, Justice Action Network (June 4)
• Senators Stand Up for Entrepreneurs with Criminal Record During Pandemic, Prison Fellowship
• CSG Justice Center Backs Bill Weakening Barriers on Small Business Owners, CSG Justice Center (June 4)
• Don’t Bar Ex-Offenders From Coronavirus Aid Funds, New York Times (June 2)
• SBA Excludes Small Business Owners With Criminal Records From Relief Loans, Forbes (May 27)
• Number of working black business owners falls 40%, far more than other groups amid coronavirus, Washington Post (May 25)
• Applicants with troubled pasts can’t qualify for PPP loans. Rubio hopes to change that, Miami Herald (May 21)
• Federal agency denies COVID-19 loans for applicants’ past mistakes, News Channel 5 Nashville (May 20)
• We Have Criminal Records. Don’t Shut Us Out of the Recovery, Barron’s (May 18)
• Paycheck Protection Program shouldn’t exclude ex-cons who have paid their debt to society, Dallas Morning News (May 13)
• Does an Arrest Record Disqualify Business Owners From COVID-19 Disaster Relief? Crime Report (May 8)
• Some Business Owners Excluded From PPP Due To Criminal History, Newsy (May 7)
• Congress should include second chances in coronavirus relief bill, The Hill (May 7)
• Emergency Loan Program Excludes Ex-Cons Trying to Make Good, Corvallis Advocate (May 7)
• Is the SBA Denying Disaster Loans to Anyone Arrested in the Last 10 Years? A Leaked Powerpoint Suggests It Is, Entrepreneur (May 6)
• Local business owner says PPP application holds his past against him, WCPO (May 4)
• Nonprofit Advocates for Business Owners with Criminal Records, Biz New Orleans (May 4)
• Have A Criminal Record? COVID-19 Relief May Be Out Of Reach, Law 360 (May 3)
• Emergency Coronavirus Loans Will Cripple Some Small Businesses, National Interest (May 1)
• Sen. Portman says small business owners with criminal records should be allowed to apply for PPP, News 5 Cleveland (April 30)
• How the SBA is Stepping on Small Business Owners, R Street (April 30)
• Small businesses just got a $300B bailout but many who need a second chance won’t get a dime, The Star-Ledger/NJ.com (April 28)
• A criminal record shouldn’t be a barrier to the Paycheck Protection Program, Pennsylvania Capital-Star (April 27)
• By restricting PPP based on criminal record, many non-profits will suffer, Philadelphia Inquirer (April 27)
• Paycheck Protection Program Leaves Behind Formerly Incarcerated Business Owners, JJIE (April 24)
• Rep. Ayanna Pressley Calls For Racial Data On Coronavirus Business Loans, WGBH (April 24)
• Christian leaders demand access to COVID-19 relief loans for business owners with criminal record, The Christian Post (April 23)
• Former felons should not be pushed out of loans under CARES Act, USA Today (April 23)
• Some ex-felons excluded from small business relief in spite of Trump’s criminal justice reform platform, CNN (April 22)
• Criminal records shut small biz owners out of aid program, AP (April 21)
• A criminal past means no Paycheck Protection Program loan, CBS (April 21)
• Don’t deny pandemic relief loans to second-chance entrepreneurs, AEI (April 21)
• Formerly Incarcerated Americans Were Excluded From Federal COVID-19 Relief, The Appeal (April 20)
• Advocates lament exclusion of those with criminal records from business loan program, Catholic Sentinel (April 20)
• Paycheck Protection Program coronavirus relief: ‘They say it’s for everyone, but it’s really not’, Cincinnati.com (April 19)
• If You’re A Business Owner On Probation, Don’t Bother To Apply For COVID-19 Relief Loans, KCUR (April 16)
• Don’t Let Red Tape Limit Second Chances During Pandemic, CSG Justice Center (April 14)
• Not every small business owner can qualify for SBA Paycheck Protection loans, Kelo (April 13)
• Trump Administration Tells Some Business Owners “Do Not Apply” for Coronavirus Loans, The Marshall Project (April 8)