Feds walk back from strict limits on convicts accessing stimulus funds

New changes from the SBA allow some small business owners with criminal records to seek COVID-related stimulus funds.

Facing pressure from justice advocates and lawmakers, the Small Business Administration has announced key changes to its rules regulating who is eligible for accessing COVID-related stimulus funds from Washington.

Previously, officials from the SBA and the Treasury Department had said they would deny assistance to any business in which a part-owner had been convicted of any felony in the last five years or had been placed on probation or parole.

Under the new SBA rules, the list of disqualifying felony convictions was narrowed to specific charges relevant to government assistance. Now, a business will be denied if anyone owning 20 percent of the company was convicted of a felony specifically having to do with “fraud, bribery, embezzlement, or a false statement in a loan application for federal financial assistance.” It also excludes those convicted of any felony in the last year.

The changes were prompted in part from public outcry and lawsuits brought by the New Civil Liberties Alliance, the American Civil Liberties Union, the Public Interest Law Center, and the Washington Lawyers’ Committee for Civil Rights and Urban Affairs. The suits were filed on behalf of several businesses unable to access the stimulus funds.

One in three Americans has a criminal record, and an estimated 60,000 people alone in Oklahoma are shadowed by felony criminal records for simple drug possession. Voters in 2016 reclassified many such crimes as misdemeanors.

The nonprofit Collateral Consequences Resource Center reported previously that the SBA had long-standing administrative rules restricting applicants where any partner of the business had been indicted for a “crime of moral turpitude.” The policy also previously required that owners of the business “be of good character.” Former prison inmates often become independent entrepreneurs after finding themselves unable to find adequate employment.

Congress passed the sprawling Payroll Protection Program amid the pandemic to enable America’s small businesses to pay their rent and utilities and keep Americans receiving paychecks. When lawmakers announced the historic measures, many people with criminal histories learned they were ineligible.