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Former Prisoners Shut Out of Coronavirus Loans

The first phase of economic relief stemming from the COVID-19 crisis included $350 billion in loans aimed at keeping U.S. small businesses afloat. The CARES Act, as approved by Congress, offered hope of surviving the pandemic to any business with fewer than 500 employees.

The Small Business Administration (SBA), which was tasked with distributing the loans, included a provision that seemed to target a specific demographic. A question on the loan application asked if any of the owners of the business had been convicted of a crime.

No statistics were available as to the number of small-business owners with criminal histories, but because individuals with past felonies are barred from many jobs it is common for them to open their own business. The SBA reports over 30 million small businesses nationwide, and with The Sentencing Project estimating that up to 100 million people in the U.S. have past convictions or arrests, the portion of business owners who have been entangled in the criminal justice system is believed to be significant.

Under previous administrations, the SBA had taken into account criminal convictions of those applying for loans, and the banks that distribute loans do regular background checks on applicants. Such measures are seen as safeguards, especially during times of disaster when some seek to take unfair advantage of emergency funds.

With the national economy facing an unprecedented challenge, however, economists have argued there has rarely been such dire need to cut through red tape and funnel money into businesses without delay.

The CARES Act created the Paycheck Protection Program (PPP), intended to help small businesses continue to employ their staffs for the duration of the pandemic. The SBA explicitly barred anyone from the program who had pending criminal charges or a conviction for a felony within the previous five years. The application itself went even farther by probing into whether an applicant had been on felony parole or probation, taken a “no contest” plea, or agreed to a diversion program in the last five years.

Another part of the CARES Act provided for additional loans to small businesses affected by disasters, but the application included a three-part question covering criminal history that did not allow for differentiation between current or decades-old convictions, nor between violent and non-violent crimes.

A frustrated business owner who had a conviction from 10 years ago drew an analogy between the loan restrictions and if the rescue teams during Hurricane Katrina had stranded all those who had ever been marked with criminal charges.

“We have never seen such a sweeping mandatory disqualification based on criminal record, in any area of the law,” stated the Collateral Consequences Resource Center website, a nonprofit that highlights the impact of local, state, and federal laws on people with criminal records. Margaret Love, who operates the site and was U.S. Pardon Attorney under President Bill Clinton, further noted the residual impact on the nation’s economy when one factors in all the employees of those small businesses owned by former convicts who will also lose their jobs.