In a bold move to foster economic opportunity for individuals with criminal records, the Biden-Harris Administration, through the U.S. Small Business Administration (SBA), has announced a major revision to its lending rules. According to the SBA, the new rule, which was finalized today, aims to lift prohibitions that have historically barred many returning citizens, such as those on probation or parole, from accessing SBA-backed loans crucial for starting or growing a business. The overhaul is part of a wider initiative to prioritize equity and support for marginalized groups.
Notably evident, the barriers standing in the way of former convicts and economic reintegration will be dismantled, as the SBA is set to strike criminal history questions from its loan applications. However, for those with a history involving incarceration or government fraud, eligibility remains off-limits. "For too long, small business ownership has been out of reach for returning citizens," SBA Administrator Isabel Casillas Guzman stated, highlighting an effort to rebuild what was lost due to past convictions and to edge toward a more inclusive economy, in an article published by the SBA.
The latest ruling will extend its reach to nearly 4 million Americans on parole or probation, as it standardizes criminal history eligibility across various SBA loan programs, which annually contribute over $40 billion in capital to small businesses. Furthermore, it entrusts the verification of program eligibility to cutting-edge resources within government and private-sector databases, replacing the need for self-disclosed criminal history on applications.
Consumer Financial Protection Bureau Director Rohit Chopra remarked on the significance of the decision, mentioning the importance of the SBA's move in breaking down the long-standing barriers that financing aspiring entrepreneurs with criminal pasts faced, easing their path to build and expand small businesses. As entrepreneurship has proven to cut recidivism by as much as 30% for unemployed individuals with a prison record, this could be a crucial step in addressing the steep 27% unemployment rate faced by this demographic, as detailed in the SBA's published statement.
While the rule adjustment signifies a leap forward in broadening access to economic tools, the integrity of the loan repayment process will stay intact. The SBA will continue vigorous fraud checks, and lenders retain the prerogative to assess criminal history as part of a comprehensive loan application evaluation, abiding by legal guidelines and based on credit risk evidence.
