a. Equal Credit Opportunity Act (ECOA). SBA may not arbitrarily require the signature of a non-applicant owner or spouse to join in a loan application solely due to marital status or ownership. Therefore we cannot deny eligibility based on a non-applicant owner’s or spouse’s refusal to join the application or sign the Note (see appendix 12).
ECOA also prohibits discrimination on the basis of race, color, sex, marital status, religion, national origin, age, receipt of income from a public assistance program, and the exercise in good faith of rights under the Consumer Credit Protection Act. It applies to all loan programs covered in
this SOP. For business loan applications it covers, sole proprietors, partners, corporate officers, directors, and stockholders.
b. Businesses Considered as Hobbies. Some endeavors constitute hobbies of the owner even though they are organized as a business. As hobbies, they are not eligible for physical loss or EIDL assistance. If you have reason to believe that an endeavor is in fact a hobby, determine if IRS has reviewed the business status. In the absence of an IRS review, consider whether the business is properly licensed by appropriate authorities, and whether reasonable efforts have been made to operate as a business rather than a hobby.
c. Applicant's Character.
(1) Felony Committed During a Riot or Civil Disorder or Other Declared Disaster. Individuals convicted during the past year of a felony during and in connection with a riot or civil disorder or other declared disaster are not eligible (1106(e) of P.L. 90-448, Department of Housing and Urban Development (HUD) Act of l968 and 13 CFR §123.101(a)). You must decline their application for policy reasons.
(2) Criminal Arrests/Indictments/Convictions/Parole/Probation. It is not in the public interest for SBA to extend financial assistance to individuals who are not of good character. Applications cannot be approved without appropriate clearance from ODA when the applicant or one of the principals of the business:
(a) Have records indicating an arrest, indictment, or conviction for a criminal offense; or
(b) Are currently on parole or probation.
d. Production and Distribution of Obscene Material. By statute (Small Business Act
§4(e)), we cannot provide assistance to any business concern or other person engaged in the production or distribution of any product or service determined to be obscene by a court of competent jurisdiction.
e. Certification of Compliance with Child Support Obligations.
(1) Home Loan and Sole Proprietor Applicants. By statute (Small Business Act
§4(f)), at the time of loan closing, applicants must certify that they are not more than 60 days delinquent in child support under the terms of any administrative order, court order, or repayment agreement (entered into between the individual and the custodial parent or state agency providing child support enforcement services).
(2) Other Business Loan Applicants. The above restriction also applies to certain business principals. If any business principal with a 50 percent or greater ownership interest in the applicant is more than 60 days delinquent in child support under the terms of any administrative order, court order, or repayment agreement (entered into between the individual and the custodial parent or State agency providing child support enforcement services), you can process the application only if that individual(s) will divest all direct and indirect interest in the business. The CD/PDC may recommend approval. The AA/DA must take final action.
f. Membership Groups.
(1) Whenever a fraternal organization, country club, civic, or other membership group requests disaster loan assistance, you must immediately notify the applicant in writing that:
(a) SBA's regulations apply to their membership policies;
(b) Consideration of race, color, religion, sex, handicap, age, or national origin of applicants for membership in the organization would, during the term of the loan, be inconsistent with the non- discrimination requirements of the Civil Rights Act; and
(c) SBA will consider that SBA’s regulations override any existing restrictions in the national or local charter, by-laws, or regulations of the organization denying membership because of race, color, or national origin.
(2) We must be satisfied that enforcement of this nondiscrimination agreement will not result in the local chapter's loss of the national charter or possibly its income from membership fees. The loss of either could impact the organization's ability to repay.
(3) The Department of Justice has issued an opinion that these restrictions apply to ethnic, fraternal, or social organizations that use national origin as a membership criteria, such as Sons of Italy, Friendly Sons of St. Patrick, etc., and they are subject to the provisions of Title VI of the Civil Rights Act of 1964. Therefore, they must agree to admit members without regard to national origin as a condition of receiving a disaster loan.
(4) The applicant must provide written certification that they will comply with these nondiscrimination requirements.
(5) Exemptions from the Nondiscrimination Requirements Under the Civil Rights Act. These exemptions pertain only to gender discrimination, and apply to:
(a) Educational institutions of religious organizations with religious tenets contrary to the nondiscrimination law;
(b) Educational institutions training individuals for military service or the merchant marine;
(c) Social fraternities or sororities which are tax exempt and whose membership primarily consists of students in attendance at an institution of higher education;
(d) Certain voluntary service organizations:
(i) YMCA;
(ii) YWCA;
(iii) Girl Scouts;
(iv) Boy Scouts; and/or (v) Campfire Girls.
(e) Boys and girls conferences (the American Legion Boys State, Boys Nation, Girls State, and Girls Nation Conferences) and promotional activities of secondary schools or educational institutions for these conferences;
(f) Father-son or mother-daughter activities at educational institutions, so long as the activities are provided for students of both sexes; and (g) Institutions of higher education scholarship awards in "beauty
pageants" as long as the pageant complies with the other nondiscrimination provisions of Federal law.