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As many as 100 million people in the U.S. (one in three Americans) have a criminal record, according to The Sentencing Project. Since the majority of employers use background checks in their hiring processes, many of these people—especially those with felony convictions—have trouble finding jobs.
Over 60% of people who previously spent time behind bars are out of work for at least a full year after their release. Those who are able to find employment earn around 40% less than the general population. When you consider the fact that over half of those in state and federal prisons have minor children, the numbers become more concerning.
Ex-felons face unique challenges when they try to earn a living after incarceration. So, it’s no wonder that many people in this position are attracted to the idea of starting a business. The Rand Corporation estimates that over 3.8% of small business owners in the U.S. have criminal records, and some 1.5% have a felony record. Those percentages account for more than one million small business owners.
Unfortunately, many felons who are desperate for a fresh start still face uneven challenges as entrepreneurs, especially where business funding is concerned. However, there are resources, such as grants and small business financing, that may help ex-felons turn their business aspirations into a reality.
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5 Small Business Grants for Felons
Starting a small business requires a lot of effort, and access to capital can go a long way. Many small business owners rely on cash they have in personal savings or income from another job to help fund new business startups. Yet such resources are often not available to former felons.
Small business grants are one potential solution that could help you find the capital you need to start or grow a business. The biggest benefit that grants have to offer is the fact that you don’t have to pay them back. Because of this benefit, however, you could face a lot of competition during the application process.
Below are five small business grants for felons to consider.
Grants.gov is a system that can help small business owners—felons or otherwise—discover grant opportunities from more than 1,000 federal grant programs. To start, you can set up a Workspace account with your information. From there, you can search for grants that match your eligibility and apply online.
GrantWatch is another grant database that can help ex-felon business owners (and others) search for funding opportunities. The system features details on nearly 28,000 grant programs, including almost 1,200 small business grants.
You will need to subscribe to the service to access the full database. Membership costs between $18 per week to $199 per year. However, there is a free membership option available that can provide you with limited information about some grants at no cost.
3. FedEx Small Business Grant Contest
Through the FedEx Small Business Grant Contest, ten small businesses receive grants of up to $50,000 and $4,000 in FedEx Office print and small business services. Other winners may receive smaller business grants (up to $20,000) and other perks as well.
The entry window for the contest has closed this year. But you can review eligibility requirements online in an effort to prepare for the next round of grant applications. FedEx does reserve the right to do a background check on finalists.
4. State and Regional Small Business Grants
Your state, county or city of residence may also have small business grants available to entrepreneurs in your area. You may also be able to find grant programs designed with ex-felons in mind (or at least those that don’t exclude people with felony records) by searching for resources through organizations such as:
- Economic development centers
- Local churches or religious organizations
- State, county and city government websites
For example, New Mexico offers its residents several stimulus and recovery programs. The state’s Business Recovery Grant Program provides recipients with up to $100,000 in grant funding to cover rent, lease or mortgage payments. There are many small business grant programs available in various locations throughout the U.S.
5. Federal Small Business Grants
A former felony typically will not disqualify you from federal grant funds. But you may not find many federal grant programs designed to help former felons get a second chance either.
If you’re interested in federal business grants, consider searching Grants.gov first. Beyond small business grants, remember that you may be able to access other types of federal grant funding as well.
The Pell Grant, for example, is a need-based form of federal student aid that might help you. You could use a Pell Grant to cover the cost of schooling for traditional college classes or trade-related training that could provide you with the certification you need to start your desired business.
3 Small Business Loans for Felons
In addition to small business grants for felons, a small business loan might help you reach your business goals as well. Consider these three options:
1. U.S. Small Business Administration (SBA) Microloans
SBA loans can be an affordable way to find funding for your small business. However, the loans have a reputation for strict eligibility requirements, and for being tedious and slow.
If you are considering this type of small business funding, SBA Microloans may represent one of your best choices. The program offers qualified borrowers loans of up to $50,000 through SBA-approved lenders.
The SBA doesn’t disclose any eligibility restrictions pertaining to felony records with SBA Microloans. However, you should be prepared to provide collateral and a personal guarantee.
2. Online Small Business Loans
Online small business loans can provide many different options to help you reach your goals. And although some online loans may not feature the lowest interest rates or the most attractive loan terms available, they often offer flexibility that you won’t find with other funding resources like traditional financial institutions.
As an ex-felon, you might face obstacles that could make it difficult to qualify for business financing. However, depending on your situation, you may be able to find an online small business loan that works for you, including:
- Startup business loans
- Business loans for bad credit
- Unsecured business loans
3. Business Credit Cards
Business credit cards can be another good funding resource for some former felons. With many business credit cards, you don’t need to have a business credit score established to qualify. Revenue requirements tend to be more lenient with business credit cards as well, especially compared to business loans and other small business financing solutions.
On the other hand, your personal credit history and credit score will still need to meet the credit card issuer’s minimum requirements. If your personal credit isn’t in the best shape, you may need to improve your credit score before you apply for business credit cards with stricter credit score qualifications.
5 Small Business Resources for Felons
Outside of small business grants, loans and credit cards, there are a few other programs that could help you start a business as an ex-felon.
Help for Felons is an organization that aims to help former felons in a variety of ways. From finding housing and job opportunities to providing information on small business grants and loans, you can find many resources on the website that might make it easier to navigate life after incarceration.
2. Inmates to Entrepreneurs
Inmates to Entrepreneurs is a nonprofit organization that aims to help ex-felons create a better future for themselves and their families. The organization offers numerous resources, including free entrepreneurship courses (in person and online) and an eight-week entrepreneurship series.
3. Small Business Development Centers (SBDCs)
In addition to its small business loan programs, the SBA also provides training and counseling to small business owners—felons included—through its Small Business Development Centers (SBDCs).
You can search online for an SBDC in your area. Programs are available to established small business owners and budding entrepreneurs alike. An SBDC can provide guidance in areas such as business development, access to business capital and business financial management.
Crowdfunding is a type of online tool you can use to raise funding for your business, and in some cases, it can be life-changing. Platforms like Kickstarter, GoFundMe and IndieGoGo give you the chance to share your story with others and campaign for donations that could help you fund a new business venture.
5. Angel Investors
An angel investor is someone who offers private funding to a business startup. In exchange for financial backing, the angel investor often requires some form of compensation—perhaps equity in your business or future royalties. You’ll typically need to prove that you have an enticing business idea with a good chance of financial success (or market disruption) to attract such investors to your project.
There are also nonprofit angel investors that operate with different motives. Rising Tide Capital, for example, has a mission of helping individuals and communities improve their lives through entrepreneurship.
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