SBA Published the Updated Criminal Justice Rule

June 6, 2024

Delaney Sexton
Contributing Editor

SBA Published the Updated Criminal Justice Rule

SBA has published Procedural Notice 5000-857477 implementing the recent Criminal Justice Rule.

On April 30, 2024, SBA published the “Criminal Justice Reviews for the SBA Business Loan Programs, Disaster Loan Programs, and Surety Bond Guaranty Program” Final Rule (Rule), 89 FR 34094, which was effective May 30, 2024.

Among other things, the rule revised the regulation at 13 CFR 120.110(n) for the 7(a) Loan Program to remove restrictions on businesses with an Associate who is on probation or on parole.

As a result of the Rule, SBA is revising the 7(a) Loan Program’s application form, SBA Form 1919, page 2, question 4. A positive response will continue to render the Applicant ineligible, and because this is a regulatory prohibition, there is no opportunity for an exception or waiver. The revised question will ask:

“Is the Applicant or any Associate of the Applicant currently incarcerated, serving a sentence of imprisonment imposed upon adjudication of guilty, or is under indictment for a felony or any crime involving or relating to financial misconduct or a false statement? (If “Yes” the Applicant is not eligible for SBA financial assistance.)”

The Rule took effect May 30, 2024; however, the updated SBA Form 1919 is not yet available. SBA is working on getting the updated form out as quickly as possible, and we’ll let you know as soon as it’s available. 

Until Applicants can apply using the updated SBA Form 1919, if the Applicant answers “yes” on the question regarding criminal history (page 2, question 4), Lenders must determine whether the Applicant is eligible based on the Criminal Justice Rule’s requirements in accordance with the new question as stated above, and the Lender must document the results in the loan file.

In the Rule, SBA did not remove or change 13 CFR 120.110(q) regarding ineligibility due to prior default and loss to the Federal Government. SBA will continue its recently implemented practices to access public data to perform fraud checks before approval of any 7(a) loans.