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Every SBA loan process looks different: Each SBA loan program has their own use-cases, intermediary lenders have their own qualification requirements, and every borrower has their own, unique needs. But if we can make a blanket statement about them all (and we will), it’s that SBA loans require paperwork. A lot of paperwork. Your SBA Form 912 is one, very important, sheaf in that stack.
SBA Form 912, aka the Statement of Personal History, is just one page long, and it shouldn’t take up much of your time to fill out. But this short form is crucial to your SBA loan application: Both your lender and, potentially, the SBA, evaluate this form to determine whether a business owner and their principals are of “good character.” And any business with an “Associate of Poor Character” is ineligible for SBA funding.
The Statement of Personal History involves 13 sections (only nine of which you need to fill out), but sections 7, 8, and 9 are the most important to pay attention to: Here, you’ll indicate whether you have any past criminal activity. If you do have any past criminal activity that falls within the SBA’s designations, you’ll need to provide further details and documentations on your arrest or conviction, too.
Here’s more about SBA Form 912, why it’s important, and everything you can expect from the process.
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SBA Form 912 is integral to the SBA loan process, as one of the terms of SBA approval is that all of the business’s principals must pass the agency’s “good character” standards.
More specifically, the SBA evaluates the criminal history (or lack thereof) indicated on an applicant’s Statement of Personal History to determine his or her “integrity, candor, and disposition toward criminal actions.” And if the SBA decides that one or any of the business’s principals lacks good character, they have cause to deny the business’s loan application. (Keep in mind that Form 912 outlines the SBA’s requirements regarding an applicant’s criminal history, but your lender might have a different batch of requirements, as well.)
The Statement of Personal History sounds intimidating, we know. In reality, though, most applicants have no need to worry about SBA Form 912, neither its workload nor its repercussions. Casey McNamara, a Senior Loan Specialist at Fundera, says, “Of the slew of documents required for an SBA loan, the Statement of Personal History is one of the easiest and most straightforward to complete. Most customers don’t have many issues filling it out unless they’re a felon.”
It may seem intrusive for your small business lender to peek into your criminal history, but it is in the lender’s and the SBA’s best interest to know about an applicant’s relevant criminal activity. SBA loans are among the biggest small business loans on the market: In 2016, the SBA 7(a) loan average was $417,316. With so much capital at stake, the intermediary lender needs to be confident that their loan is heading into trustworthy pockets, and the government must also feel secure in granting their assistance for that loan.
It’s in the applicant’s best interest to answer the Statement of Personal History honestly, too: Responses determine your eligibility for an SBA loan at all, plus how quickly your loan application can be processed.
“Looking at the SBA process as a whole, you can understand why it’s crucial to ask the borrower upfront as to whether he or she has a criminal history,” says McNamara. “There’s nothing worse than being turned down by the bank after a six-week process due to a mistake in a borrower’s past that could’ve been discovered up front.”
If you’re applying for an SBA loan, it’s pretty much guaranteed that you’ll need to fill out a Statement of Personal History. SBA Form 912 is required for most types of SBA loans, including the two most popular SBA loan programs, SBA 7(a) and SBA 504/CDC.
According to the SBA’s SOP 50 10 5(D) (or, the SBA’s Standard Operating Procedure packet that addresses Form 912), all of the following people, aka Subject Individuals, must fill out SBA Form 912:
To be eligible for SBA funding, all Subject Individuals need to fulfill the SBA’s “good character” requirements. We’ll go into more detail about how, exactly, the SBA defines good character, as it applies to an applicant’s criminal history.
Although questions 7-9 are the most important of Form 912’s sections, you’ll of course need to complete six sections before that. (Section 10 calls for your signature and date, and sections 11-13 are for agency use only.)
Those first six sections are very straightforward, so they should be a (relative) breeze to fill out. Still, it’s best not to encounter any surprises on an SBA form, so, in the spirit of full disclosure, here’s what you’ll need to provide on sections 1-6:
Section 1a: Your business’s name, address, and email; plus your SBA district office, the loan amount applied for, and your file number, if known.
Section 1b: Your personal name, including any past legal names (such as a maiden name) and dates of names used. Name and address of participating lender, if applicable.
Section 2: Your percentage of ownership in the company and Social Security Number. Note that you’re not required to provide your SSN, but it will allow the SBA access to the information they’ll need to make a character determination. So providing your SSN will greatly help your loan application, and speed up the approval process.
Sections 3 and 4: Your place and date of birth.
Section 5: Indicate whether you’re a U.S. Citizen, or a Lawful Permanent resident alien. You’ll need to handwrite your initials here, too.
Section 6: Your present resident address, and most recent resident address (unless it was over 10 years ago).
Pay close attention to the questions in sections 7, 8, and 9—this is where you’ll provide information about any past or current criminal offenses, which is the true purpose of SBA Form 912. Answering “no” to all three questions means your application process will proceed normally. A “yes” response will slow the process at best, or, at worst, disqualify you from SBA loan eligibility.
Note that the SBA requires applicants to answer “yes” to all relevant criminal offenses, even if the applicant “believes the record is sealed, expunged, or otherwise unavailable.” Also, the SBA might compare the information provided on SBA Form 912 with whatever data the FBI has on file on the applicant.
Answering “yes” to question 7, unfortunately, immediately disqualifies you from receiving an SBA loan. According to SBA standards, the government agency can’t guarantee loans for businesses “with Associates who are incarcerated, on probation, on parole, or have been indicted for a felony or a crime of moral turpitude.” Individuals with a deferred prosecution also won’t be approved, since they’re treated as if they’re on probation or parole.
Answering “yes” isn’t immediately disqualifying, but the SBA will require a written explanation of the arrest to evaluate the nature of the applicant’s offense (and, in turn, to determine whether the applicant is of good character). More on what that written explanation calls for later.
Depending on the type of offense indicated, answering “yes” to question 8 will also require the applicant to undergo a background check, which will involve a Name Check and/or a Fingerprint Check. All past felony convictions, any misdemeanor convictions within six months of the application, and/or any misdemeanor convictions for crimes against minors require the applicant to complete a background check.
Again, answering “yes” to this question doesn’t necessarily disqualify you for a loan—disqualification or approval is at the discretion of your lender and the SBA, who’ll determine whether or not an applicant passes the “good character” test. What a “yes” does mean, though, is more work for all parties involved, a slowdown in the approval process, and the potential for your application to be denied.
Like question 8, answering “yes” to question 9 doesn’t automatically disqualify you from your SBA loan, but it involves the same procedure: The applicant must provide a written explanation, and relevant court documentation, detailing the nature of any relevant criminal offense. Those applicants will also need to undergo a background check.
If you answer “yes” to questions 8 and/or 9, you’ll need to provide your lender with a separate, written explanation of every crime indicated on your SBA application. That signed and dated explanation needs to include the following details, as well as any court documentation supporting your statement:
Also, the applicant should write that their probation was successfully completed, or court conditions met. You’ll need to provide supporting court documentation, too.
After your complete your SBA Form 912, you’ll submit the form to your lender, who completes an evaluation. If there was a “yes” response, your lender will send your form along to the SBA for further inspection. Lenders can’t move forward with the loans process until they’ve received written approval from the SBA office.
But if the SBA determines that an applicant lacks good character and denies their loan application, all hope is not lost! The applicant does have the option of requesting a reconsideration. The SBA might reverse a lack of good character determination if they’re satisfied with the applicant’s explanation of past offenses, the offense happened a long time ago and they have not committed any crimes since, and if the applicant has proven to live responsibly since the crime occurred.
Reconsideration request letters are addressed to the SBA, but they’re submitted through the intermediary lender.
SBA Form 912 is just one of many forms you’ll need to fill out as part of your SBA loan application, but it’s among the most important: To be eligible for an SBA loan, you, and all relevant principals of your business, must be cleared of criminal history.
If you and your principals have no felonies on your records, there’s no need to stress over your Statement of Personal History. But if you do have a criminal record, it’s best to admit that right off the bat.
Although it may be painful to admit to a criminal history, concealing criminal offenses on an SBA Form 912 will land an applicant in legal hot water: Whether that concealment is intentional or not, that applicant will potentially face criminal prosecution, fines, and even jail time. (Their SBA loan application would be denied, too.)
And remember, if you do answer “yes” to questions 8 or 9, you do still have a shot at securing an SBA loan. Just ensure that you provide all the necessary documentation ASAP, and the rest is up to your lender, and the SBA, to decide.