The fallout from the COVID-19 pandemic has sent the U.S. economy into the greatest downturn since the Great Depression, and small businesses are among the hardest hit. To help business owners and employees survive, the federal government created the Paycheck Protection Program PPP to offer low-interest loans that are forgiven if at least 75% of the loan is used to cover payroll.
While initially impressed at how Congress and the Trump administration moved swiftly to meet the historic need, I was disheartened to learn they left out many hard-working Americans by prohibiting hundreds of thousands of people with prior criminal records from accessing the program. As the Senate plans to vote on a new relief bill, Congress needs to fix this mistake and pass the bipartisan Paycheck Protection Program Second Chance Act.
People who have been involved with the criminal justice system often face barriers to employment even after they pay their dues to society. As a result, many turn to self-employment to afford their rent, put food on the table, and support their families. Women of color are especially likely to start their own businesses — more than a quarter of black and Hispanic women who have criminal records rely on self-employment income.
That’s why so many of us who work on criminal justice reform were surprised to learn that businesses were ineligible for a PPP loan if an owner of 20% or more of its equity had a felony conviction or had been placed on pretrial diversion, probation, or parole in the past five years.
So, whom does this exclusion hurt?
A new analysis commissioned by Arnold Ventures found that about 3% of sole proprietorships, the most common type of business, were likely ineligible for a PPP loan because of a criminal record. While this may seem small, it translates to about 700,000-800,000 people.
Moreover, this analysis found Black and Hispanic men suffered disproportionately from the criminal history exclusion, with Black men five times more likely to be ineligible than White men and Hispanic men three times more likely to be ineligible.
At a time when the nation is grappling with the reality of structural racism, this policy only works to perpetuate inequality.
It didn’t have to be this way. Congress did not mandate these exclusions — the SBA inserted them. This is an unfortunate shift away from second-chance reforms promoted by the last four presidential administrations, including President Trump himself.
During the Obama administration, SBA participated in the Federal Interagency Reentry Council and worked to create opportunities for people with criminal records who were trying to run their own businesses. The Microloan Program, for example, expanded eligibility to allow small business owners on probation or parole to access microloans.
“Small business ownership and self-employment are paths toward wealth creation and independence,” said SBA spokesman Miguel A. Ayala in 2015. “This option can be particularly useful for citizens who may have difficulty finding employment after returning to their community from prison.”
Today, advocates are successfully rallying to fix the PPP program and eliminate these discriminatory rules.
The SBA has narrowed its exclusions. And in Congress, a bipartisan coalition including Sens. Rob Portman, Ben Cardin, James Lankford, and Cory Booker, are working to pass the Paycheck Protection Program Second Chance Act to go even further. The bill draws on language the House already passed in its latest relief package, so we should be hopeful the final package will further expand access to PPP funds for those entangled in our justice system. Recent polling by the Justice Action Network suggests that’s just what the public wants: More than 60% of voters believe business owners with criminal records should not be prohibited from receiving PPP loans or other federal stimulus money.
After years of overcriminalization, one in three Americans has a criminal record. If we want our neighbors, colleagues, and family members to be able to earn an income, pay their taxes, and contribute to our communities, then we must ensure they are not denied a path to opportunity when they need it the most.
Amy Solomon is vice president of criminal justice at Arnold Ventures. She previously served as executive director of the Federal Interagency Reentry Council.
