April 30, 2020

Cardin, Portman Urge SBA Not to Penalize Small Business Owners with Previous Criminal Records During Coronavirus Pandemic

WASHINGTON — U.S. Senators Ben Cardin (D-Md.), Ranking Member of the Senate Small Business Committee, and Rob Portman (R-Ohio) today sent a letter to Treasury Secretary Steven Mnuchin and Small Business Administration (SBA) Administrator Jovita Carranza urging the SBA to allow small business owners with criminal records to apply for the Paycheck Protection Program (PPP). Currently, PPP, which provides forgivable loans to small businesses that keep their employees on payroll during the COVID-19 crisis, denies applicants if the business has “an owner of 20 percent or more of the equity of the applicant [who] is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years.” The application also includes several questions that make it unclear as to whether other types of criminal records or past involvement with the justice system may prohibit access to these loans.

Preventing emergency loans from being distributed to businesses owned by individuals with criminal records will have catastrophic consequences for people who have done exactly what society asked of them: they turned away from crime, started a business to support themselves and their families, and contributed to their communities. These catastrophic consequences extend to their employees as well. An estimated one in three American adults has a criminal record; and because people with records often have trouble finding employment, many of them have gone on to start their own businesses after they have paid for their mistakes. 

We write to request that the Small Business Administration (SBA) revise its Interim Final Rule for the Paycheck Protection Program (PPP) so that it properly reflects Congress and the Administration’s support for second chances following a record of bipartisan criminal justice reforms in Congress dating back more than a decade. The rule should not deny assistance to people with criminal records who have turned their lives around, started a small business, created jobs and contribute to their communities,” wrote the senators.

The full letter can be found below and here.  

Dear Secretary Mnuchin and Administrator Carranza:   

We write to request that the Small Business Administration (SBA) revise its Interim Final Rule for the Paycheck Protection Program (PPP) so that it properly reflects Congress and the Administration’s support for second chances following a record of bipartisan criminal justice reforms in Congress dating back more than a decade. The rule should not deny assistance to people with criminal records who have turned their lives around, started a small business, created jobs and contribute to their communities. 

During the month of April, we celebrate Second Chance Month, which exists to raise awareness of the collateral consequences of a criminal conviction, and unlock second-chance opportunities for people who have paid their debt to society to become contributing citizens. The President and Congress have worked together in the past to support individuals who have paid their debt to society and are re-entering their communities.  

We believe that policies should support second chances. This was most recently evident in the enactment of the Fair Chance Act in 2019, which opened federal government work to people with criminal records, and the overwhelming bipartisan vote in 2018 for the First Step Act, which provided for important correctional and sentencing reforms. Importantly, this legislation reauthorized the Second Chance Act, which provides funding to state and local reentry programs.  

We applaud the SBA’s efforts to quickly provide small business owners across the country with relief so they can continue to pay their employees and combat the adverse economic effects of this pandemic. However, the new restrictions placed upon small businesses with partial owners who have been involved in the criminal justice system will only hurt the economy, and further diminish the workforce and the tax base they generate. 

Specifically, we are concerned about the following restriction contained within 13 CFR Part 120 section III(2)(b)(iii): 

“An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years.” 

This rule departs from the SBA’s own pre-existing eligibility standards for loans, including its Economic Injury Disaster Loans (EIDLs), and deviates from the Administration’s support for second chances. It also deviates from Administrator Carranza’s prior expression of interest during her nomination process to widen SBA’s footprint in the returning citizen community. The language is overly broad, excluding millions of business owners and their employees from much-deserved and much-needed emergency relief. Due to longstanding inequalities in the justice system, the restrictions will also have a disparate impact on communities of color, just as those communities are among the hardest hit by this health and economic crisis.  

Through the CARES Act, and specifically the PPP, Congress sought to ensure that emergency relief is made available to small businesses that have been negatively impacted by this pandemic. This relief was not intended to exclude business owner who have made mistakes, paid their debt, and turned their lives around. Rather, it was intended to provide a bridge to hard-working American small business owners who are keeping people employed and supporting the essential services that benefit all of us during this unprecedented crisis.  

We ask that you revise this harmful, exclusionary Interim Final Rule so that more businesses are eligible for emergency relief, and ensure that SBA rules support second chances, a stronger economy, and safer communities across all of its programs, including EIDL.  

Sincerely,

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