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SBA 504 Q&A - What if a Potential Borrower Has an Arrest Record?

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SBA 504 Loan Interest Rates

close interest rates

February 2025

25-Year Fixed Rate Standard:
6.286%

25-Year Fixed Rate Refinance:
6.315%

20-Year Fixed Rate Standard:
6.355%

20-Year Fixed Rate Refinance:
6.395%

Estimated 10-Year Fixed Rate Standard:
6.642%

Estimated 10-Year Fixed Rate Refinance:
6.689%

Official monthly SBA 504 effective interest rate tables can be found at Eagle Compliance LLC. 25- and 20-year term loans fund every month; 10-year term loans fund every other month. Effective interest rates are inclusive of servicing fees, which are subject to credit risk of the applicant.

 

Looking for some help? Call 800.504.LOAN or Email Us

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Lending News Archives

SBA 504 Q&A - What if a Potential Borrower Has an Arrest Record?

Aug 2022

As many lenders are aware, the U.S. Small Business Administration (SBA) has procedures in place for borrowers who have prior arrests. In this edition of SBA 504 Q&A, we will address how to handle these situations from the beginning of the loan process.

The first critical step is to ensure the borrower CORRECTLY answers all questions on the SBA Statement of Personal History (SBA Form 1244).

Certified development companies (CDC), like Florida First Capital Finance Corporation/First Capital Finance (FFC/FCF), must process a Character Determination if borrowers answer YES to either of the following questions in Form 1244:

  • Have you been arrested in the past 6 months for any criminal offense?
  • For any criminal offense – other than a minor vehicle violation; Have you ever 1) been convicted; 2) plead guilty; 3) plead nolo contendere; 4) been placed on pre-trial diversion; or 5) been placed on any form of parole or probation (including probation before judgment)?

IMPORTANT: It is possible for people to be arrested and still be able to answer NO to the questions above; however, it is imperative the borrower disclose ALL arrests to the CDC.

As you can imagine, if the answer to either of the questions is YES, the CDC must take further steps including collecting a Character Determination Package to determine eligibility of the applicant. The Character Determination Package requires the following items:

  • SBA Form 1244 and Affidavit;
  • Explanation from the borrower; and
  • Full Supporting Court Documents, including evidence that all fines were paid as agreed.

What happens next depends on the type of arrest. With the Character Determination Package completed, the remaining question is, “will the SBA require a fingerprinting process?”

The answer to that is - there are four circumstances which require fingerprinting:

  1. Felony convictions;
  2. Misdemeanor convictions in the last 6 months;
  3. Misdemeanor convictions against a minor; and
  4. Final disposition completed within the last 6 months.

If any of the above circumstances are applicable to the borrower, the borrower will need to be fingerprinted and a full clearance processed by the FBI.

Remember, the reality is this is more common than you may think – let’s just make sure we get this taken care of UP FRONT to reduce delays in the loan process as it can take 2 to 4 weeks to be cleared by the FBI/SBA.

If the answer is NO to the four circumstances listed above, the CDC has authority to determine borrower eligibility without the need of fingerprinting and continue with the loan process.

To ensure borrowers receive all the benefits of the SBA 504 Loan Program, contact an FFC/FCF Business Development Officer early in the process. We are here to help!

With 40 years’ experience, FCF/FFC is one of the nation’s top-ranked CDCs serving Florida, Georgia, and Alabama. To learn more about the SBA 504 Loan Program, click here.

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