Tag: COVID-19 Economic Injury Disaster Loan

Collected resources on record restrictions for small business relief

*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) Read more

Is SBA denying disaster relief based only on an arrest?

*UPDATE (7/7/20):  “SBA throws in the towel and Congress extends the PPP deadline” In response to COVID-19, Congress created the Paycheck Protection Program (PPP) and expanded the Economic Injury Disaster Loan (EIDL) program, appropriating hundreds of billions of dollars across these programs to assist small businesses affected by the pandemic and economic crisis.  As we have been pointing out in this space over the past five weeks, the Small Business Administration (SBA), which administers both programs, has imposed broad restrictions on access to relief based on arrest or conviction history, restrictions that were neither required nor contemplated by Congress.[1] Until now, attention has been focused on small business owners unfairly denied PPP relief based on their record.  Members of Congress and major organizations have written in opposition to PPP regulations and policies that impose barriers based on a record, and dozens of media outlets have covered the issue.  But the EIDL disaster relief program has largely gone under the radar, in part because the SBA has not published guidance about how it is treating EIDL applicants with a record. In a new development, documents posted anonymously on Reddit last week, and published by Law360 on May 3, purport to be internal SBA guidance for reviewing EIDL applications.  The documents instruct agency staff to deny relief to applicants if they have ever been arrested, unless the arrest was for a misdemeanor and occurred more than 10 years ago.  These leaked documents, also covered in detail by Entrepreneur this morning, would suggest that behind the scenes the SBA is imposing even greater record-related restrictions on COVID-19-related disaster relief than on PPP loans. Upon review, we believe that this new information about the record-related standards being applied by the SBA to EIDL loans is likely correct.  We have heard from readers who were denied EIDL relief after SBA staff asked them questions over email about their arrest history, questions that correspond exactly to those in the leaked documents.  An SBA spokesperson, given an opportunity to correct the record if it needed correcting, declined to confirm or deny the information. We have never see a government program in the United States with such broad and arbitrary restrictions based on criminal history.  The purported EIDL guidance is devoid of nuance: it instructs staff to deny relief based on arrest history regardless of offense and regardless of whether the arrest resulted in prosecution, much less conviction.  The look-back period is limitless for felony arrests and a full decade for misdemeanor arrests.  The guidance inevitably produces unwarranted disparities: a person with a decades-old felony arrest that was never charged, or whose arrest resulted in an acquittal, is treated more severely than someone with a more recent misdemeanor conviction.  Finally, the guidance cannot be squared with existing published SBA policies, as discussed below. In normal times, a sweeping and secretive restriction on disaster relief would be problematic.  In this global public health and economic crisis, it is inexcusable. The standards in the leaked SBA guidance are inconsistent with applicable laws, regulations, and agency policies.  Existing statutes and regulations governing the 7(b) disaster loan program, of which EIDL is a part, only require the SBA to deny disaster loans if an otherwise eligible applicant has been convicted in the past year of a felony related to a riot, civil disorder, or other declared disaster. However, a close look at the SBA’s policy statement on disaster loans suggests that the leaked documents may represent a shortcut through an existing vetting process during the present exigency. The published EIDL policy statement (§ 3.6) requires disqualification if the “applicant or principal owner is presently on parole or probation following conviction of a serious criminal offense.”  Further, because “[i]t is not in the public interest for SBA to extend financial assistance to persons who are not of good character,” the agency will make a “character determination” in the event “any adverse information develops concerning the character or background of a disaster loan applicant.”  This adverse information might develop from a three-part question about criminal history in the SBA disaster loan application forms, including for COVID-19-related EIDL relief, a question requiring a “yes” or “no” answer to the entire section: a. Are you presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction? b. Have you been arrested in the past six months for any criminal offense? c. For any criminal offense – other than a minor vehicle violation – have you ever been convicted, plead guilty, plead nolo contendere, been placed on pretrial diversion, or been placed on any form of parole or probation (including probation before judgment)? The policy statement provides if an applicant answers “yes” to this wide-ranging criminal history question, they must disclose the details of their record on a Form 912: Statement of Personal History.  Based on that information, the SBA will determine if a fingerprint sample is required.  The policy mandates fingerprints only if the person had a felony conviction more than a year ago in connection with a riot, civil disorder, or disaster, but it permits them in other cases.  If the record disclosed “is both minor in nature and was committed more than 10 years ago, fingerprints may not be required to continue processing.”  After all necessary information is collected, the SBA “completes its character evaluation” and finds the person eligible or ineligible.  The criteria applied for this final decision are not disclosed. Presumably, this policy statement is still legally applicable to EIDL, but the SBA seems to be skipping steps in the process to simply deny relief to anyone who might be subject to a fingerprint sample in ordinary times, instead of fashioning a rule appropriate to these extraordinary circumstances.  To anyone familiar with the widespread recent efforts to encourage reintegration, it is a bit shocking to see the inner workings of a federal agency pulling in the opposite direction. [1] The only statutory record-related restriction for these programs is a half-century old exclusion from EIDL of persons convicted in the last year of a felony “during and in connection with a riot or civil disorder.”  See Department of Housing and Urban Development (HUD) Act of 1968, P.L. 90-448 § 1106(e). Read more

The Marshall Project reports on criminal history barriers to small business relief

In the past two weeks we have written at length about the U.S. Small Business Administration (SBA)’s “bumpy guidance on criminal history requirements” for small business financial relief during the COVID-19 pandemic (see also “Applying for an SBA loan with a criminal record”).  Today, Eli Hager of The Marshall Project has picked up the story with a new piece that draws on our research and will bring the story to a wider audience.  We hope this will prompt the SBA to revise its policy, or guide Congress toward clearer and fairer standards if it passes a planned new round of small business assistance. Before the pandemic, the SBA didn’t automatically disqualify people for small business loans based on a past criminal record, and we can’t understand why it would suddenly decide to do so now, when small businesses across the country are struggling to stay afloat.  (Preexisting policy, described here, disqualifies a business if it has a principal who is incarcerated, is under supervision, is facing charges, or lacks “good character.”)  The new SBA policy—which automatically disqualifies even certain people who have completed a diversionary program and were never convicted—seems entirely at odds with the wave of recent state and federal law reforms aimed at encouraging reintegration. The Marshall Project piece notes that “never in recent U.S. history have so many conservatives and liberals agreed that people with criminal histories deserve a second chance—especially job-creating small-business owners.”  It is no wonder that the SBA “did not respond Tuesday to multiple requests for clarification,” when its new policy is so indefensible. An excerpt from The Marshall Project piece, “Trump Administration Tells Some Business Owners ‘Do Not Apply’ for Coronavirus Loans,” is included below: Michelle E. of Scottsdale, Arizona, was relieved when President Trump last month signed into law the sweeping stimulus package intended to keep the U.S. economy afloat during the coronavirus pandemic. Michelle and her husband have owned a small hardwood flooring business for 18 years. She hoped the law’s $350 billion for small-business loans would help them avoid laying off any of their five employees, whom she said are like family. So she got a loan application through her bank. But as she filled it out, Michelle saw the question: Had any of the business owners pleaded guilty to or been on probation for a criminal offense? Michelle immediately thought of her husband, who is on probation because he took a guilty plea on a theft charge after taking home the scope of someone else’s rifle on a hunting trip, something he says he did accidentally. His name and her last name are being withheld because his criminal case, and the couple’s loan application, are pending. “Because of that, our employees can’t get help from the United States government?” Michelle said. It’s a little noticed frustration compared to the logistical problems of the Trump administration’s rollout of the CARES Act. A set of new regulations for implementing the law, issued by the Small Business Administration, prohibits small-business owners with criminal records from accessing the desperately needed loans. “We have never seen such a sweeping mandatory disqualification based on a criminal record, in any area of the law,” wrote the Collateral Consequences Resource Center, a nonprofit, nonpartisan website that tracks how federal, state and local laws affect people with past charges or convictions. The site is run by Margaret Love, who was the U.S. Pardon Attorney during the Clinton administration. [. . . .] Critics of the new regulations said the rules waste precious time examining people’s pasts when so many are, with each new day, losing their lives or livelihoods.  One New Jersey pet-supply store owner with a 10-year-old felony conviction put it this way in an email to the Collateral Consequences Resource Center: It is as if, after Hurricane Katrina flooded New Orleans, rescuers flying in helicopters asked families stranded on their roofs if they had ever faced a criminal charge.“ And if anyone answered yes,” he wrote, “they would move along to the next house.” Read more