Criminal Records May Be A Barrier For Business Owners Applying for the CARES Act PPP



A client of mine who is six months away from completing a felony probation recently contacted our office regarding her qualifications for a PPP loan through the Small Business Administration amid the COVID-19 pandemic. As most are aware, the government recently enacted a multi-trillion dollar Cares Act which expands SBA business loans by creating a Paycheck Protection Loan Program(PPP). What's unique about the PPP is that the loans are forgivable for businesses impacted by the pandemic if used during the "covered period" to cover:


  • Payroll—salary, wage, vacation, parental, family, medical, or sick leave, health benefits

  • Mortgage interest—as long as the mortgage was signed before February 15, 2020

  • Rent—as long as the lease agreement was in effect before February 15, 2020

  • Utilities—as long as service began before February 15, 2020


It is unclear how many small-business owners nationally have a criminal history. But The Sentencing Project, a research and advocacy group, has estimated that as many as 100 million Americans have an arrest or conviction in their past, and there are more than 30 million small businesses around the country, according to the Small Business Administration. Because people with felony records in particular often can’t get jobs, many start their own businesses, from plumbing to food-services to fitness.


My client, who now owns a restaurant with 20 plus employees is one of them.


If you are completing the SBA loan application you will come to a question that reads as follows:



Her question to me was, "Does my criminal history disqualify me from receiving PPP?"


A Felony on Your Record Could Disqualify Your Business


The SBA states that:


“Businesses are only ineligible if an owner of 20 percent or more of the equity of the applicant is presently incarcerated, on probation, on parole; subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or, within the last five years, for any felony, has been convicted; pleaded guilty; pleaded nolo contendere; been placed on pretrial diversion; or been placed on any form of parole or probation (including probation before judgment.”


In other words, a COVID-19-related small business loan may not be available to someone with a felony on their record. However, you are encouraged to still apply.

What is the SBA Form 912 and Why Will I Need to Complete It?