Re-entering the workforce can be difficult after serving jail time as a convicted felon. Not only do felons lose their ability to vote and serve on a jury, they can also have difficulty finding a job to support a new positive lifestyle. Starting a business may be an opportunity to start fresh, but there may be some roadblocks when it comes to scaling growth. Understanding small business loan opportunities for felons can make the path to successful financing much easier.

Small business loans for felons.

Felons will have a harder time finding loans they are eligible for, but there are still some limited options available through the SBA.

SBA loans

SBA loans are backed by the Small Business Administration, which incentivizes lenders to work with qualified borrowers. Felons aren’t automatically denied, but there is an additional form you’ll have to fill out to be evaluated by your lender. Keep in mind that not all lenders who offer SBA loans will work with felons, and those who do will have very strict requirements.  

Qualification questions include if the applicant is currently facing charges (an automatic disqualification), if they have been arrested in the past six months, convicted of or pled guilty or no contest to a crime, or are currently on parole or probation. The applicant is then required to provide details regarding the charges and sentencing along with documentation that all fines and court conditions have been met.

There are a variety of SBA loans to explore, which can be used for things like purchasing real estate, buying equipment, or expanding or purchasing a new business. Most SBA loans are designed for established businesses rather than start-ups. 

Grants & other financial resources for felons.

In addition to taking out a business loan, it’s also worth exploring alternative options to raise capital for your company, including grants, investors, and crowdfunding.

Federal grants

Businesses owned by convicted felons are eligible for federal grants from Grants.gov. That’s because eligibility is based on the business’s background and proposals, not personal finances or history. Business grants are different from loans in that they don’t need to be repaid. Grants are listed on behalf of federal agencies, like the National Institutes of Health or the Environmental Protection Agency, to perform work or research on their behalf.

State grants

There are a number of state resources available through individual states. Most states have an economic development administration that receives federal grant funding to pass on to small business owners. Some of these may be specific to regional areas; for instance, you may find funding opportunities if your company operates in a designated rural region.

Entrepreneurship programs

Large corporations often sponsor programs to help launch and scale emerging businesses. They might provide grant funding or provide free products and services. FedEx, for example, hosts an annual program in which the winners are awarded a cash grant, plus services from FedEx. 

Angel investors

Angel investors are private individuals who use their own wealth to fund companies, often in exchange for equity. They’re currently the largest source of business capital in the U.S. And while you may need to disclose your criminal history as part of your pitch, they’re typically more focused on your business concept and growth opportunities than your background. There are several online platforms that connect entrepreneurs with angel investors, and of course, it’s also good to network locally. 

Crowdfunding

Two of the most common types of crowdfunding campaigns are rewards-based crowdfunding and equity crowdfunding. With the first option, you post a business idea and seek funding from individuals in exchange for a tiered system of rewards. With equity crowdfunding, you take money in exchange for partial ownership of the company. Most crowdfunding platforms require you to set a financial goal and won’t release any funds unless contributions reach that amount.

Resources for felons

HelpforFelons.org

HelpforFelons provides information and resources on how to find a job, housing, or start your own business when you have a criminal record.

Inmates to Entrepreneurs

Inmates to Entrepreneurs offers a free eight-week course to anyone with a criminal background who is interested in starting their own business.

freegrantsforfelons.org

This online resource provides information on housing, education, and jobs for felons.