{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-a-business-be-eligible-for-a-7-a-loan-if-a-principal-is-currently-on-probation-or-paro","api_url":"https://dealroom.so/api/public/questions/can-a-business-be-eligible-for-a-7-a-loan-if-a-principal-is-currently-on-probation-or-paro","question":"Can a business be eligible for a 7(a) loan if a principal is currently on probation or parole for a felony?","topic":"Eligibility determinations","audience":"lender","bot_mode":"lender","short_answer":"No, a business is generally ineligible for a 7(a) loan if any owner or principal is currently incarcerated, on probation, or on parole for any felony or a crime involving moral turpitude.","rule":"SBA eligibility rules specifically exclude businesses with principals who are currently involved in the criminal justice system in certain capacities. This includes being incarcerated, on probation, or on parole for a felony or a crime involving moral turpitude. This is a character-based eligibility criterion designed to protect the integrity of the program. These facts are typically collected on SBA Form 1919 and Form 912.","example":"A borrower applies for a 7(a) loan, disclosing on Form 1919 that they are currently on probation for a felony conviction from two years prior. The lender would determine the business ineligible based on this information and decline the application.","what_lenders_check":"Lenders must carefully review SBA Form 1919 and Form 912 for all principals to identify any disqualifying criminal history issues. Failure to identify and properly address such issues could lead to a denial of the SBA guaranty.","required_facts":["Principal's criminal status","Probation/parole status","Felony vs. misdemeanor","SBA Form 1919/912","Character eligibility"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","SBA Form 1919 - Borrower Information Form","13 CFR Part 120 - Business Loans","Criminal Justice Reviews for SBA Business Loan Programs - Final Rule"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"SBA Form 1919 - Borrower Information Form","url":"https://www.sba.gov/sites/default/files/2025-03/2025.02.27%20Form%201919%20-%20Updates%20%28FINAL%29_03-12-2025%20%281%29.pdf"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"},{"title":"Criminal Justice Reviews for SBA Business Loan Programs - Final Rule","url":"https://www.federalregister.gov/documents/2024/04/30/2024-09009/criminal-justice-reviews-for-the-sba-business-loan-programs-disaster-loan-programs-and-surety-bond"}],"related_questions":[{"question":"Can a trust or an estate be an eligible borrower for an SBA 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-trust-or-an-estate-be-an-eligible-borrower-for-an-sba-7-a-loan"},{"question":"What constitutes \"passive income\" disqualifying a business from 7(a) loan eligibility?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-passive-income-disqualifying-a-business-from-7-a-loan-eligibility"},{"question":"Are businesses that primarily derive revenue from real estate rentals eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/are-businesses-that-primarily-derive-revenue-from-real-estate-rentals-eligible-for-a-7-a-l"},{"question":"Can a business primarily engaged in lending or investment be eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-business-primarily-engaged-in-lending-or-investment-be-eligible-for-a-7-a-loan"},{"question":"What impact does a principal's recent federal tax lien have on 7(a) loan eligibility, even if paid?","url":"https://dealroom.so/for-lenders/questions/what-impact-does-a-principal-s-recent-federal-tax-lien-have-on-7-a-loan-eligibility-even-i"},{"question":"How does the SBA define 'passive business' making it ineligible for a 7(a) loan, and what specific activities might trigger this?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-define-passive-business-making-it-ineligible-for-a-7-a-loan-and-what-spec"}],"related_terms":[{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"Standard 7(a) loan","url":"https://dealroom.so/glossary/standard-7-a-loan"},{"term":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-loan"},{"term":"7(a) Small Loan","url":"https://dealroom.so/glossary/7-a-small-loan"},{"term":"Eligible business","url":"https://dealroom.so/glossary/eligible-business"},{"term":"Variable-rate 7(a) loan","url":"https://dealroom.so/glossary/variable-rate-7-a-loan"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/can-a-business-be-eligible-for-a-7-a-loan-if-a-principal-is-currently-on-probation-or-paro","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}