As NAGGL previously indicated, the Final Rule on Criminal Justice Reviews for the SBA Business Loan Programs, Disaster Loan Programs, and Surety Bond Guaranty Program, , takes effect May 30, 2024.  Among other things, the rule amends 13 CFR 120.110(n) to remove current restrictions that make a business with an associate who is on probation or parole ineligible for a 7(a) or 504 loan.  Individuals who are currently incarcerated after being adjudicated guilty, or under indictment for a felony or any crime involving or relating to financial misconduct or a false statement remain ineligible. 

SBA intends to issue a Procedural Notice implementing the rule-change and amending SOP 50 10 7.1.  SBA also is revising SBA Form 1919, Borrower Information Form, page 2, question 4, to make the form consistent with the regulatory change.  [A similar revision is being made to SBA Form 1244 which applies to the 504 program.]  However, neither the SBA notice nor the updated Form 1919 will be issued prior to the effective date of the rule-change. 

To cover this interim period, Ginger Allen, Director, Office of Financial Assistance, issued a message providing guidance for lenders regarding handling loan applications until the formal procedural notice and revised forms are issued.  That message includes the prospective language of revised question 4 on SBA Form 1919:  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.]  

Per the SBA message, beginning May 30, 2024, until the revised forms are issued, the following guidance applies:

Until Applicants can apply using updated program application forms, if the Applicant answers “yes” on the question regarding criminal history (SBA Form 1919, page 2, question 4, or SBA Form 1244, page 4, question 4), 7(a) Lenders and CDCs must determine whether the Applicant is ineligible for a 7(a) or 504 loan based on the Criminal Justice Rule’s requirements in accordance with the new question as stated above, and the SBA Lender must document the results in the loan file.

Please see the SBA message for additional information.  NAGGL will post the promised SBA procedural notice and the revised SBA Form 1919 when they are issued.