June 27, 2022
C-Suite Wednesday – Senate Explores Loosening Criminal History SBA Loan Requirement
Today, the Senate Committee on Small Business & Entrepreneurship is holding a hearing to determine if SBA should ease criminal background disqualification rules from SBA lending to provide more business opportunities for justice-impacted individuals.
“A New Start: Opportunities and Barriers to Entrepreneurship for Returning Citizens and Justice Impacted Individuals”, starts at 2:30 p.m. Eastern Time.
“Sadly, just like me… too many businesspeople think someone with a past will be legally risky, expensive and a waste of time. Our results suggest otherwise…. so, do I. You see, I’m not just a small business owner, I’m a recovering addict, with 31 years sober,” says Rob Perez, the Co-Owner of DV8. “Here’s what I want you to know: I am not the exception, and neither is DV8. People in recovery can be EXCELLENT in the workplace. What if EVERY American Small Business rethought HR and employed one person with a past? Based on my experience, small businesses can make a huge impact on recidivism.”
As of 2018, the United States had the highest incarceration rate in the world with 2.2 million people incarcerated. Dr. Damon Phillips mentions that more than two-thirds of returning citizens are rearrested within three years of reentry into society according to the Bureau of Justice Statistics. In his opening statement, he shares that the unemployment rate of returning citizens is 27.3%, a more than 20% higher rate than the general public. As a result of labor market discrimination, 18.61% of returning citizens started businesses as compared to 11.48% of those who have never been incarcerated.
Another witness, Coss Marte, voices his experience as a justice-impacted entrepreneur. He exited prison with a business plan for CONBODY, a prison-style fitness boot camp that hires formerly incarcerated people to teach fitness classes. He had little success due to a number of financial and policy barriers, even with the resources Defy Ventures provided. After years of battling, he has a successful business with 50 formerly incarcerated individuals working there and a zero percent recidivism rate.
Taking this into consideration, Dr. Phillips discusses the policy implications for these issues:
• One solution would be reducing or removing restrictions on government loans to people with criminal records. Congress can also consider providing tax incentives for investing in businesses founded by justice-impacted entrepreneurs.
• In prisons, entrepreneurial training and education should be more widespread and systematic. There is a rise in these programs, but the programs are typically only available in a few prisons and jails.
• His final suggestion is to expand programs that start connections between aspiring entrepreneurs with criminal records, mentors, and angel investors.