At Prudent Lenders, we know borrowers with excellent business ideas may have suffered from prior mistakes, even those resulting in a criminal record. Lenders will often disqualify borrowers with criminal histories after noting the SBA requirement that “owners and managers must be of good standing,” however, an SBA loan isn’t out of reach for many of these prospective borrowers.
If you have a customer with a criminal record, keep the door to financing open by requesting SBA clearance for their criminal offense. Prudent Lenders can efficiently coordinate this for you and your prospective borrowers. Given the time-consuming nature of obtaining proper clearances, it’s essential to begin the process as soon as possible.
Who needs clearance for criminal offenses?
The SBA asks all small business owners applying for a loan the following questions:
- Have you been arrested in the last 6 months for any criminal offense?
- For any criminal offense – other than a motor vehicle violation – have you ever:
- Been convicted
- Pleaded guilty
- Pleaded nolo contendere
- Been placed on pretrial diversion
- Been placed on any form of parole or probation (including probation before judgment).
If your borrower answers “yes” to any question above, the SBA will require clearance. All clearances are reviewed on a case-by-case basis. However, small business owners who are presently subject to an indictment, criminal information, arraignment, or other means where formal criminal charges are brought in any jurisdiction, are automatically ineligible for SBA assistance.
How to obtain clearance
If you’re a current Prudent Lenders customer, here’s what you need to know about the clearance process. Not a customer? Learn more about Prudent Lenders’ SBA loan service provider offerings.
Step 1: Complete SBA Form 912
Our step-by-step overview of the SBA Form 912, which current Prudent Lenders clients can download from our form library, will help you get started. Be sure to complete the form in its entirety. Note that initials are required on questions #5, #7, #8, and #9. A signature is required at the bottom of the form.
Step 2: Discuss the Offenses
Provide Prudent Lenders with the following information:
- When: Date of offense, including month, day (if possible) and year.
- Where: City and state, or county and state where offense/s occurred.
- What: Description of the specific charges (e.g. DUI, assault, forgery, robbery).
- Charge/s: Description of the level of individual charges (e.g. misdemeanor, felony).
- Disposition of Charges/How: Description of the disposition of the charges, including any fines imposed, jail time, probation terms, and so on.
Step 3: Provide Required Documents
Applicants must include the following documentation:
- A copy of the court docket.
- A letter from the courthouse, or other such certified documentation from the courthouse, verifying the disposition of the charges.
- A dated and signed explanation of the incident including verified statement that all conditions of the court have been satisfied.
- A short paragraph describing the incident and a follow-up statement describing what the borrower is doing to ensure the offense will not occur again (this statement should be very specific).
- If a felony arrest has been disclosed, a Fingerprint Card (FD 258) must be completed and submitted to the SBA for clearance.
Step 4: Submit Forms
In cases of misdemeanor charges:
- Submit all forms and documentation, as stated above in step #3, to Prudent Lenders.
- The lender must provide signed certification that the applicant has been cleared of any and all misdemeanor charges.
- The lender must provide the following language in a letter to the file: “The lender has retained the supporting information and court documentation for [insert borrower’s legal name], including the original SBA Form 912 in the file and determined upon review of the court’s disposition that all disclosed crimes were misdemeanor convictions whose conditions were met more than six months prior to receipt of the application and there were no convictions for crimes against minors.”
In cases of felony charges:
- Submit all forms and documentation, as noted above in step #3, to Prudent Lenders.
- Mail the Fingerprint Card (FD 258) and all necessary documentation to:
Chris Levy, NYBDC
50 Beaver Street, 5th Floor
Albany, NY 12207
We’re your knowledgeable SBA lending partner
Prudent Lenders has a wealth of experience with criminal offense clearances and other SBA lending challenges. Our goal is to consistently deliver outstanding tools, services, guidance and training for offering the SBA loan programs to your clients. Need help? Get in touch today!