• Applying for an SBA Loan with a Felony in your Background: You Better Understand SBA Form 912

    12 July 2017
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    Character Counts

    In order to qualify for the U.S. Small Business Administrations (SBA) loan programs, you and your partners must meet certain eligibility requirements? But, isn’t good credit, a solid business plan and collateral enough? No, SBA also looks at your “character”. SBA is also looking for good character and a mistake in the past can trip you up and prevent your loan from closing. SBA is looking at your behavior, integrity, candor and past criminal record. SBA Form 912 is all about you not your credit score per se and not your collateral.

    As set forth in current SBA Loan Program Requirements, to be eligible for an SBA Advantage loan, every proprietor, general partner, officer, director, managing member of a limited liability company (LLC), owner of 20% or more of the equity of the Applicant, Trustor (if the Small Business Applicant is owned by a trust), and any person hired by the Applicant to manage day-to-day operations (“Subject Individual”) must be of good character.

    What if I have a felony in my past?

    Per the SBA’s Procedural Notice dated December 14, 2016, when a Subject Individual discloses a felony conviction, a background must be completed by SBA and the Lender must submit a copy of the complete SBA Form 912, the Subject Individual’s written explanation, supporting information, court documentation, and FD 258 to SBA. The Lender may not disburse the loan until formal clearance from SBA is received in writing. OPS will conduct a background check that will include a Fingerprint Check via submission of the FD 258 to the FBI or Electronic Fingerprint Submission, if available.

    For felony convictions, Lenders must submit to SBA the complete and detailed Form 912 package signed by the Subject Individual within 90 calendar days prior to submission to SBA.Upon receipt of the complete Form 912 package, the Office of Personnel Security (OPS) will request the fingerprint check from the FBI. The FBI generally takes 30 days to process fingerprint checks. Once OPS receives a report back from the FBI, OPS will refer the matter to the SBA Director/Office of Financial Assistance (D/OFA) or designee to make the character determination as follows:

    1. On receipt of the OPS referral, OFA will issue a character determination in the form of a memorandum to the SBA Field Office or LGPC, as identified by the Lender in the 912 package.

    2. OFA will determine either that the Subject Individual has good character, or that an applicant is not eligible for an SBA Advantage loan due to the Subject Individual’s
    lack of good character based on the Form 912 package and the information received from the FBI, including any failure to disclose offenses.

    3. OFA transmits its memorandum with the character determination to the SBA Field Office or LGPC, as identified by the Lender in the 912 package, via email. OFA will
    not provide information directly to delegated lenders or non-delegated lenders.

    4. The SBA Field Office or LGPC will advise the Lender in writing of the Agency’s clearance decision.

    5. The OFA memorandum and the FBI reports are deliberative and confidential, and also contain information protected by the Privacy Act. As a result, this information must not be released outside of SBA.

    In sum, a felony is not necessarily the end, but it will be an uphill battle and you better have a great explanation for the indiscretions of your past and a exemplary record since, if you expect to get a clearance letter. Keep in mind that regardless of the SBA’s own requirements, the Lender may have even stricter requirements to participate in their SBA lending program. And, don’t think about flubbing the answer. Information and financial disclosures submitted to the SBA are generally under penalty of perjury.

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  • Will a criminal record prevent me from getting an SBA loan or modifying one?

    12 November 2015
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    That depends. There are indeed eligibility factors for financial assistance based on the activities of the owners and the historical operation of the business. As such, the business cannot have been:

    (a) a business that caused the government to have incurred a loss related to a prior business debt;

    (b) a business owned 20 percent or more by a person associated with a different business that caused the government to have incurred a loss related to a prior business debt; or

    (c) a business owned 20 percent or more by a person who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral depravity.

    If you are having trouble with your SBA loan and are unsure whether your past or present actions might disqualify you from further participation in SBA programs, call one of the attorneys at the Perliski Law Group for a free initial consultation (214) 446-3934 or use the Contact Us form on our site.

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