Bill Blocks Future SBA Funds for Businesses, Individuals Convicted of Pandemic Fraud

This legislation, titled the "Assisting Small Businesses Not Fraudsters Act," takes direct aim at preventing individuals and businesses convicted of fraud related to COVID-19 relief programs from receiving most types of future financial help from the Small Business Administration (SBA). The core purpose is to safeguard taxpayer funds and ensure SBA resources are directed towards legitimate businesses by barring those found guilty of specific financial misconduct or false statements concerning pandemic-era aid.

Closing the Loophole: Who's Barred?

The bill establishes a clear rule: if an individual considered an "associate" of a small business is finally convicted of financial crimes or lying about eligibility for specific COVID-19 relief funds, both that individual and the business itself become ineligible for most SBA financial assistance. "Finally convicted" means the legal process is complete – either appeals ran out or weren't filed. The prohibition specifically targets aid sought after a conviction related to programs like the Paycheck Protection Program (PPP) loans (Section 7(a)(36) & 7(a)(37)), certain COVID-19 Economic Injury Disaster Loans (EIDL) (Section 7(b)), Restaurant Revitalization Fund grants (ARP Act Section 5003), or Shuttered Venue Operators Grants (Economic Aid Act Section 324).

Defining Connections: What's an 'Associate'?

Understanding who counts as an "associate" is key here. The definition is broad, covering more than just the person convicted. It includes:

• Officers and directors of the business.
• Anyone owning more than 20% of the equity.
• Designated "key employees."
• Entities that hold a 20% stake in the business, if their associates fall into the categories above.
• Anyone else deemed to be in control of the business.

This means if a company's Chief Operating Officer, for instance, is convicted of PPP fraud, the entire company could be barred from future SBA loans (like standard 7(a) loans), not just the COO personally.

Important Caveats: Disaster Loans and Timing

There's a significant exception: the bill does not block access to future disaster loans under Section 7(b) of the Small Business Act. These are typically loans provided after natural disasters or other specific non-pandemic emergencies, differentiating them from the COVID-19 EIDL program targeted by the fraud prohibition. Additionally, this crackdown applies prospectively. Any contracts or agreements the government already has in place before this Act is enacted remain unaffected. The focus is strictly on preventing future misuse of funds by those already proven to have committed fraud within the pandemic relief framework.