If you are a convicted felon serious about starting a business, your best chance to succeed is to get a start up loan or a grant. The good news is that there are options and financial help available from both private institutions and the federal government.
Here, we will break down different types of loans you can get to start a small business and how to go about it the right way.
How Does A Loan Work?
A loan is money that you borrow with the agreement that you will repay the amount borrowed with interest. The interest is the percentage of money you are charged to get the money. Usually, if you have good credit, you can get a lower interest rate. However, small business loans are available even for felons with really bad credit, you will just have much higher interest to pay back. When you apply, the financial advisor will go over all these important details with you.
Where Can A Felon Get A Business Loan?
There are a number of institutions that may be able to offer you a loan.
Small Business Administration
SBA offers a number of different types of loans that you can qualify for even with a felony conviction. However, previous experience indicates that its very difficult or nearly impossible to get a large business loan from SBA. Felons have a lot more success getting a Micro loan through SBA’s MicroLoan Program, which focuses on giving loans under $50,000. The average reported loan is about $13,000. Note that SBA does not loan the money, rather it works with a number of approved lenders and guaranteed a portion of the loan.
Different lenders will have different eligibility criteria and types of loans they offer. However, in general, to qualify you must have a complete business plan and a clear proposition on how you will use the money. Note, that the turn around time can be as long as 5 to 8 months, so you should explore other opportunities, while you wait.
These micro loans can only be used for:
Equipment / Machinery
Microfinance Funds From The State
Most states offer some type of financing/small business loans for residents looking for start up funds. These can be relatively small amounts of money, under $5,000-8,000, but this can be just what you need to get your feet off the ground. For example, one of the best funded programs is California Opportunity Fund, but something similar may be available in your local area. One big advantage is that the turn around time for getting approved and actually seeing the money is often much quicker compared to SBA loans.
Funding For Amazon Sellers
If you have ever considered starting your own online business and selling products on Amazon, it may be easier to accomplish than you think. In recent years, Amazon started a loan program for its marketplace sellers, where they basically help you finance your online store with them. Why? Because the more sellers Amazon has, the more money they make! To qualify, you already need to be a seller, but this loan can help you significantly grow your business. They offer competitive rates, no paperwork to fill out and very quick turn around times.
Local Producer Loan Program
If your business idea is in any way related to farming or food, Whole Foods offers a Local Producer Loan Program. It has started in 2007, and the company has made over $22 million in loans to date. These loans are primarily for local small farmers and food artisans. They offer loan amounts between $10,000-100,000
and low fixed interest rates.
The money can NOT be used for operating expenses. It can be used for business expansion and capital expenditures, such as buying more animals, new equipment and infrastructure, or expanding crops. You must make monthly payments on this loan.
If you have good credit, you may be able to get a loan from a bank. However, this is not the case for the majority of people with a felony. Just in case, you may want to check out Lending Tree, which is a go to service between top lenders and borrowers. You can easily compare different types of personal and business loans offered, their interest rates repayment terms, as well as qualification criteria.
What Is A Grant?
The main difference between a grant and a loan is that you don’t need to pay back they money given as a grant. Its FREE. A loan you do need to pay back, and usually with interest. Grants are given out on a NEED BASIS. In other words, programs have criteria (usually its financial hardship) that determine whether or not someone qualifies to get this free money.
There are a number of grants available to felons who want to start their own small business. Private companies, as well as state and federal government have various programs that you may qualify for.
You can learn what about the business grants that you may be able to secure, as well as apply online at grants.gov. You can also call their support at 800-518-4726 to get live assistance and get started with this processes.
Getting Money Through Crowdfunding Websites
A trend that has been rapidly growing in recent years is to get money from online crowdfunding sites. Here you have the benefit of avoiding high interest rates, being disqualified for bad credit, or for being a felon. Everyone has an equal chance to convince people to fund them. All you need is a great story that explains why you deserve the money, videos that present your product or service and a strong social media engagement that will spread your campaign to as many people as possible.
The best sites to work with are:
This is an American public-benefit corporation based in Brooklyn, New York which has built a global crowdfunding platform focused on creativity. The company’s stated mission is to help bring creative projects to life.
Go Fund Me
This site is very similar to Kickstarter, and to date, it has helped different people raise over 3 billion dollars for their needs.
This platform is geared specifically toward entrepreneurs. You can get financing to bring your business product or idea to life. There is also help/tutorials on how to create a good product, marketing, and how to launch a successful crowdfunding campaign.
How Do I Get Started?
Because there is so much information out there about getting a start up loan it can be very confusing to figure out what you need to do. We strongly suggest getting help from one or more of these reliable resources:
Visit Career One Stop, these are centers that are sponsored by the US Department Of Labor, where you can go to get help with seeking employment as well as applying for federal grants or loans to start a business.
Go to a local Small Business Development Center. This none profit organization provides free counseling on how to start and finance a small business. They have volunteer expert advisors in the fields of law, accounting, and marketing who can help you get your ideas together and create a business plan.
Finally, check out SCORE – a 50 year old none-profit organization that has been providing Free mentoring for people who want to start a business. They have branches nation wide, so look for one near you.
If you are serious about becoming your own boss, check out your guides:
How A Felon Can Start A Business
Freelancing Jobs And Ideas
Entrepreneurship Education Programs