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SBA Information Notice: SBA Form 994 Updated for Criminal Justice Reviews Final Rule

Summary

This SBA Information Notice, Control No. 5000-857374, effective July 9, 2024, is addressed to SBA surety partners and small businesses and announces an update to SBA Form 994, Application for Surety Bond Guarantee Assistance. It recounts that SBA published a proposed rule on September 15, 2023 (88 FR 63534) and the final rule on April 30, 2024 (89 FR 34094), effective May 30, 2024. Under the amended 13 CFR 115.13(a)(2)(i), a business is ineligible for an SBA-guaranteed bond if a Principal is currently incarcerated, serving a sentence of imprisonment imposed upon adjudication of guilty, or under indictment for a felony. The notice says the rule changes only SBA's minimum background check requirements.

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Full text

                           SBA Information Notice


TO: All SBA Surety Partners and Small                                              CONTROL NO.: 5000-857374
Businesses
                                                                                   EFFECTIVE: July 09, 2024
SUBJECT: SBA Form 994 Updated for Criminal
Justice Reviews Final Rule




The purpose of this Notice is to announce an update to SBA Form 994, “Application for Surety
Bond Guarantee Assistance.”

On September 15, 2023, SBA published a Notice of Proposed Rulemaking (NPRM) in the Federal
Register (88 FR 63534) with a 60-day comment period. The NPRM announced SBA’s intention to
amend SBA’s regulations on the criminal background review of applicants.

On April 30, 2024 Federal Register Notice (89 FR 34094) Criminal Justice Reviews for the SBA
Business Loan Programs, Disaster Loan Programs, and Surety Bond Guarantee Program (Rule)
was published, amending regulations governing SBA’s Surety Bond Guarantee (SBG) Program for
criminal background reviews effective May 30, 2024. For the SBG Program, the relevant
regulation amended is 13 CFR 115.13(a)(2)(i).

Before the rule change, the language at 115.13(a)(2)(i) stated that a business is ineligible for a bond
guaranteed by SBA if the business has a Principal is under indictment for, or has been convicted of
a felony, or a final civil judgment has been entered stating that such person has committed a breach
of trust or has violated a law or regulation protecting the integrity of business transactions or
business relationships.

On the effective date of the Rule, 115.13(a)(2)(i) is amended to state:

A business is ineligible for a bond guaranteed by SBA if the business has a Principal who is
currently incarcerated, serving a sentence of imprisonment imposed upon adjudication of guilty, or
is under indictment for a felony.

The phrase “serving a sentence of imprisonment imposed upon adjudication of guilty” means a
person is serving a sentence for a crime for which they have been found guilty. It does not include
a person who is detained but not yet convicted, such as people in jail pending trial.

This Rule only changes SBA’s minimum background check requirements. The Rule revision does

 PAGE 1 of 2                                                                                    EXPIRES: 7/1/25
 SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
 Must be accompanied by SBA Form 58

                                     Federal Recycling Program   Printed on Recycled Paper
not impact a Surety’s ability to conduct a criminal history background check, following their own
policies, provided they do so in a manner that complies with other relevant laws and does not result
in an unjustified discriminatory effect on a protected class group. Sureties can still deny bonds
where criminal history, when considered along with other information, presents an unacceptable
credit risk.

As a result of the Rule, Part V question 2 on SBA Form 994, regarding the prior criminal history of
each Proprietor, General Partner, Guarantor, Limited Partner, Stockholder, or other equity holder
owning 20% or more of the small business has been revised to state:

“Are you currently incarcerated, serving a sentence of imprisonment imposed upon an adjudication
of guilty, or under indictment for a felony? If an individual’s answer is “Yes”, the applicant is not
eligible for SBA assistance.”

Any business that checks “yes” to question 2 is ineligible. Because this is a regulatory requirement,
there is no opportunity for a request for a waiver or exception to policy.

Sureties may download the revised SBA Form 994 from SBA’s Documents website. The revised
form may be used immediately; however, SBA has allowed a 30-day grace period from the
effective date of the Final Rule for Sureties to begin using the revised form.


Questions concerning this Notice may be directed to Kevin Valdes, Management Analyst, at
kevin.valdes@sba.gov.

Jermaine Perry
Director, Office of Surety Guarantees.




 PAGE 2 of 2                                                                                 EXPIRES: 7/1/25
 SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
 Must be accompanied by SBA Form 58

                                     Federal Recycling Program   Printed on Recycled Paper

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