SBA Loan with a Record??

So I ran into a situation recently where my business partner was arrested for possession. It’s still unclear exactly what will come from this in court, but I was wondering if anyone has had experience in trying to secure an SBA loan with a criminal record. Any feedback would be helpful as I really have no clear idea of what the impact will be and I don’t want to approach a bank with this until we figure out exactly what his punishment is.

just what i would want starting out in new business a drug using partner :shock:

I agree, you really need to think twice about who you are going into business with.

that’s a perfectly fair statement, but I’ve thought about it at length and will obviously pay for the consequences if this is emblematic of things to come. this is a good friend of mine from years past and I have chosen to trust him regardless of this. however, for the time being, I am really just concerned about the effects on acquiring a loan. we would be co-signers under an LLC partnership and I don’t have any record. not to mention we’d be fronting 30% of the business loan.

i dont recall ever being asked if i had a record when appling for a loan :? but then again i always thought the slick on the other side of the desk was the crimanal!!! :twisted:

Was it a misdemeanor or felony charge? Unless he was dealing, he probably got a misdemeanor charge; I doubt that would have much impact on a loan application.

I’m not entirely sure of a felony charge, but as was pointed about above… I don’t think I’ve ever seen that question on a loan application.

well this is reassuring. it will just be a misdemeanor. I have been asked about criminal record in the past which is why I was curious. thanks for the feedback.

Yes, this can very well be a problem. It is very common for the bank to ask if you have any felony or misdemeanors & if they are not traffic related they will require an explanation. I remember this to be part of your personal history statement. I know this to be the case for SBA’s. Banks will run background on business loans to check for fraud. Sorry to say you have ZERO chance of getting an SBA loan.

http://en.wikipedia.org/wiki/SBA_504_Loan

Scroll down the page to the heading:
“Borrowers with an imperfect history are always turned down.”…And the following: “The SBA is also allowed to approve those with misdemeanors and felonies, though the process will take a little longer to close”

Mr Royster,

I don’t believe struggle99 is in the market for a 504. I’m pretty certain banks write the 7a & the SBA provides the guaranty. No bank will write the loan with a recent misdemeanor for drug possession. And if an officer does, back end audit will catch it.

Am i the only person here who thinks that it shouldn’t be a big deal…what was it…did he get caught with a pund of heroin, or a bag of pot…If he smokes pot on occasion and was in the wrong place at the wrong time, its not a big deal, you can’t smoke enough pot to loose all of your money. give me a pothead at work over an alchoholic anyday. You may not think it’s right but thats how i feel.

I will ask my business banker tomorrow when we meet with her. It is my belief that any loan officer would run, not walk, away from a known recent illegal drug user of any sort . . . especially if recently arrested and convicted.

On a personal note, I would not risk my personal financial future or business reputation co-signing for someone who has a drug conviction. It will be in the papers, and beer/wine/liquor license applications and hearings will be a huge nightmare when it comes to “morally upstanding” clauses.

Willing to break this law in a manner such to get caught means poor judgment and inherent willingness to break laws that could end up risking my business . . . can you say “drug related property seizure”. This guy will have lots of police attention for a while locally, at the least.

Would YOU loan that much money (for a start-up restaurant no less) to as stranger who had a recent drug arrest?

I’m afraid I have to side with Nick on this one.

The old adage “you are what you hang with” would certainly ring true if this is outed to any of your competitors…be prepared for a huge onslaught of negative publicity.

bad news . . . People going places just don’t get in trouble for such things.

This person may have been going to a party and had something in his pocket, then got hit by someone else driving…if you don’t know the situation it wouldn’t be fair to judge

I didn’t judge. A court with a judge and/or jury did. Indiscretion is indiscretion . . . newpapers, fellow business owners and banks aren’t going to care what I think, only what the background history shows.

I checked and we did sign a release for the bank to run our background when we got our loan.

I answered this thread saying I didn’t think it would be a problem; that it may not have much of an impact if it was a misdemeanor. I only meant that it may not be a big deal from a reporting standpoint.

I agree with Nick that if I was a loan officer and found out, I’d be running from this deal. I would also be thinking twice if this was a business partner, since this was recent. I’m sure a lot of us did a little “experimenting” in our youth and it was no big deal. I know many people that continue to “experiment” on a continual basis into adulthood. Some of those people would probably make good employees or even managers, but I certainly wouldn’t go into business with any of them.

I know that wasn’t the original question, but I think you need to take a good look at this person and decide if you want to be in business with them.

It is a tough situation. My advice to you would to be to play it out for a bit and see what happens. Small time BS and I really dislike the actions of potheads probably will not impact qualification as long as you both have the lending experience.

Look deep into this however. This is a very tough business with no room deviation.

Good Luck

PD