PPP discourages assistance to small business owners with criminal records
KB Brown started Wolfpack Promotionals, which creates advertising and promotional material, in Minneapolis six years ago, in part to help others. He saw that small businesses needed to advertise their services but couldn’t afford some of the bigger businesses. “We realized that we could do it at a [fairer] price and make it look as good, if not better, ”he said. “It’s something I’m good at and enjoying, and we realized we could make a business out of it. “
Becoming an entrepreneur was also one of the few avenues open to him. He was convicted of a felony in 1993 and spent 18 years in prison. With this story, “unfortunately, finding a job is not the easiest thing in the world to do,” he said. A criminal history can make it almost impossible to get a job: a 2011 study found that many employers simply prohibit people from applying, which is part of the reason why men with criminal backgrounds constitute a third party of all unemployed men in the prime of their lives. Instead, Brown was able to build a booming business, at least doubling sales each year and hiring six employees.
And then the pandemic struck. Its sales fell more than 90 percent in March. “We haven’t even bothered to watch lately. It’s probably worse, ”he said in May, defeat in his voice. Customers don’t have the money to pay for advertising. He has projects in his shop ready to be picked up that no one has come to claim and pay for. “It hurts us. It hurts us very much. He has put all his employees on leave.
So Brown decided to apply for the Paycheck Protection Program, created by Congress through the CARES Act, which provides small business owners with forgivable loans to cover their payroll and other costs. During the first round of funding, he went to his bank and “we basically made fun of the place,” he said. Undeterred, he filled in the request for second round money. But as he made his way to the end of the form, one of the last questions stopped him dead: “During the last 5 years, for any crime, the plaintiff (if it is an individual) or any owner of the plaintiff 1) has he was condemned; 2) pleaded guilty; 3) pleaded nolo pretendere; 4) has been placed in pre-trial diversion; or 5) was placed on some form of parole or probation (including pretrial probation)? “
The Small Business Administration, as Brown discovered, has outright excluded any business owner who has been convicted of a felony in the past five years from getting a P3 loan, as well as those who have simply been charged. and placed in pre-trial diversion, parole, or probation without yet having been convicted or having spent time in prison. It also excluded anyone currently in prison or on probation or parole.
“I don’t understand why the question is there in the first place,” Brown said. A felony charge, he argued, “should not be an economic death sentence.” And in that case, it could be a punishment imposed not only on him, but on the employees who rely on him for their paychecks. Technically, Brown shouldn’t be disqualified from the program given that his conviction dates back almost three decades. But at the end of May, a month after his candidacy, he still had not obtained PPP funding. He fears his lender has thought twice about approving him for the money with a felony in his background.
Asking such a question on the application form will not only exclude those who are banned, but will deter others who might otherwise be eligible. “Most employers have heard them loud and clear,” said Breon Wells, president of the Daniel Initiative, a lobbying firm that advocates for criminal justice issues. Applying and later finding out that you are disqualified, he said, “is tantamount to being potentially reinstated into the system.”
The treatment of people with a criminal record stands in stark contrast to that of companies that have come into conflict with the law. The New York Times identified at least seven companies that obtained $ 45 million in PPP loans in total despite recent lawsuits against them. Biopharmaceutical company MiMedx Group got $ 10 million after agreeing to pay the Justice Department $ 6.5 million weeks earlier to resolve allegations it violated federal law. US Auto Parts Network received $ 4.1 million despite being in a “heated dispute,” the Times reporters write, in recent years with Customers and Border Protection, including the seizure of some of its products under the pretext that they are counterfeit. Aerospace maker CPI Aerostructures earned $ 4.8 million even though its chief financial officer resigned in February after revealing major accounting problems.
Meanwhile, other SBA loan programs do not cross out people who have committed crimes, but instead subjects them to an individual “good character” assessment, giving the plaintiff “the ability to explain himself, to explain the circumstances of the crime,” Wells said. When Congress passed the CARES Act, “it was silent on the issue,” said Sarah Crozier, senior director of communications at Main Street Alliance, a small business network. It was therefore up to the SBA to issue its own directives.
“Even if they’re technically eligible, it’s up to the lender to decide ultimately.”
The SBA has gone much further than its previous directions with the PPP. “It was quite shocking,” said Crozier. She pointed out that a person who has not been convicted of anything is still presumed innocent in the justice system, and yet is still not allowed to get a PPP loan.
Crozier is concerned that lenders may decide to reject claims from people with a criminal background but who technically should qualify out of overabundance of caution, as can happen with Brown. “You put people in limbo when you have the question” on the app, she said. “Even if they’re technically eligible, it’s up to the lender to decide ultimately.” Additionally, a leaked PowerPoint SBA reported by Entrepreneur calls on SBA administrators to turn down economic disaster loan applicants from any small business owner who has been arrested for a felony or who has been arrested for a misdemeanor in the past 10 years.
The SBA did not respond to a request for comment from The Intercept.
“It’s frustrating to constantly have something hanging over your head for so many, many moons,” Brown said.
Many small business owners with criminal histories are probably in the process of opting out of P3s. In the beginning, there was a crushing demand for PPP loans, and in the fray, many large companies won while the smaller ones have been discarded. “If you’re a small business, you already feel like the game is against you,” Wells said. “If you are a small business owner of color and have a criminal history, it makes it not only unlikely, but even inconceivable and impossible that you could get a loan.”
“We are the last on anyone’s agenda and we are the first to experience a funding cut. “
Courtney Stewart did not apply for a PPP loan, despite having to lay off two of his nonprofit organization’s five employees, cut hours and pay the rest. “We are the last on anyone’s agenda, and we are the first to take a funding cut,” he said. “It’s just a state of emergency for organizations like mine.”
Stewart runs the National Reentry Network for Returning Citizens, which provides mentoring, counseling and other services to help people leaving jails and jails. Its services are even more in demand now that some prisons and prisons are release people because of the coronavirus. He does not have the resources to meet this need.
Still, he doesn’t think he could get a PPP loan. “Everyone who works for the organization has a criminal history,” he noted. He doesn’t understand why this should prevent him from receiving help. After all, he said, his donors can trust him with their money. The SBA, he argued, should be able to exercise the same control. “The paycheck protection program, in principle, sounds good,” he said. “But there are too many things that are discouraging. “
He is also concerned about the impact it will have on those trying to re-enter society and become financially stable by running their own businesses. Many like him are likely to be afraid of the program. They “already see the federal government as a monster,” he said. “This is the reason why we don’t get involved in a lot of these processes, because we already feel left out and we don’t have a chance at all of this.”
Perhaps the issue of criminal history plays a role in the racial disparities of the PPP. According to a recent survey, more than 40 percent of black and Hispanic business owners haven’t gotten any of the requested federal help, while 21 percent are still awaiting a response. In 2010, a third of black men had felony convictions on file, compared to 8 percent of the general population.
There is some desire to lift the criminal history rule. In the HEROES law passed in the House, only those who are currently incarcerated or who have already been convicted of a crime for financial fraud or deception would be excluded from the PPP. The bill also says that the SBA cannot issue other restrictions. So far, Republicans in the Senate have not indicated their willingness to pass the legislation, and the legislation they passed to correct aspects of the PPP did not include anything about criminal history. But there is some bipartisan concern about the problem. On June 4, Republicans Rob Portman and James Lankford teamed up with Democrats Ben Cardin and Cory Booker to present legislation that would remove the ban on candidates convicted of felony.
Wells is confident there will be at least one “conversation” about changing the rule in the Senate. “The Conservatives see this as a question of the right to work,” he said. “These are people who have gone out of their way to come out and be able to fight recidivism rates by accessing that money.”
Brown can’t afford to wait any longer. He is unsure of the future of his business. “Things are bad for us right now,” he said. “We don’t know how things are going to turn out. Wolfpack Promotionals may never reopen.