“Read all about it!” We’ve all been at it since SBA’s Final Rule on Background Reviews was issued on April 30, 2024, with a May 30, 2024 effective date etched into our consciousness. You might remember that I alerted you to review and update your Loan Policies accordingly in an early May JRB eBulletin. So now we have the Final Rule. Finally.

Cart Before the Horse? Horse Before the Cart? Whatever. As we all know, the Final Rule removes restrictions on applicants and associates on probation or parole. A business with an associate who is incarcerated or under indictment for a felony or crime involving or relating to financial misconduct or a false statement is ineligible for an SBA  loan.[1] But no other miscreants are similarly ineligible.

In the Meantime… you get to handle new loan applications, with SOP revisions and updated SBA forms and applications  still “to come.” Guidance has been provided by SBA’s Office of Financial Assistance with a message marked “URGENT” – well two messages really, one with revised instructions for CDCs – on what to do until the Agency issues all the revisions and updates.

What it means? You get to decide. Well, Kinda … For 7(a): Language regarding people on probation and parole will be removed from SBA Form 1919. A new question will ask whether the applicant or any associate is incarcerated, serving a prison sentence or is under indictment for a felony or a crime related to financial conduct or a misstatement. A “Yes” will make the applicant ineligible.

For CDCs:  The current SBA Form 1244 includes questions regarding businesses and associates on probation or parole. So “Yes answers mean the business is ineligible. With those restrictions now removed, a business with an associate on probation or parole may be eligible as far as the background review is concerned.

The Upshot: As I write this, OFA’s  New and Revised 7(a) and CDC Instructions are combined here for clarity’s sake: “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 … the [7(a) lender and] the CDC must document the results in the loan file.”

All clear? GREAT! Let the wait for form revisions and a Procedural Notice begin.

Richard Jeffrey
Senior Associate




[1] SOP 50 10 7.1.  p. 19.