By Shawn D. Bushway, Dulani Woods, Denis Agniel, David Abramson

mall: businesses whose owners have criminal records are often ineligible for federal assistance programs. One recent high-profile example of a program with such restrictions is the Paycheck Protection Program (PPP), which was part of the Coronavirus Aid, Relief, and Economic Security Act. The PPP provided money for payroll, rent, mortgage, and utilities to businesses with fewer than 500 employees.

Initially, companies owned by individuals with felony criminal records were ineligible to receive funds. The restrictions were later eased to expand the number of eligible small businesses. However, the PPP restrictions, in both their strict and relaxed forms, were adopted in the absence of solid information about their effects.

How Many Small Business Owners Have Criminal Histories?

To address this knowledge gap, a RAND team

• estimated the national prevalence of small business owners with criminal records

• estimated how many small business owners, businesses, and employees were potentially affected by the initially strict PPP restrictions and how these numbers changed when the Biden administration eased restrictions

• examined prevalence in two states (Minnesota and North Carolina) to gain a more granular view of effects on particular industry sectors

• compared the state estimates with the estimates developed through the Criminal Justice Administrative Records System (CJARS).

The analysis presents the first-ever national estimate of U.S. small business owners who have criminal records. The researchers used information from a data-aggregation company that collects and organizes data on business ownership and criminal history records, linking individual criminal records with information about company ownership. To obtain a more granular estimate, researchers used data from a different source to estimate prevalence numbers in two states (Minnesota and North Carolina) and used these data to examine how estimates vary by industry sector.

The national estimates (Table 1) show that 3.8 percent of small business owners have a criminal record. This percentage corresponds to approximately 1.1 million small business owners. More than 1.7 million employees are affiliated with these businesses. Within the group of business owners who have criminal histories, approximately 433,000 have a history of felonies.

Santa Monica, CA: RAND, 2021. 4p.