Business Resources and Grants for Felons
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
After serving time behind bars, convicted felons face the task of getting back on their feet and finding a way to make an income. While re-entry programs across the country help former inmates find jobs, some people may have bigger goals in mind.
The jobs available to former inmates often don’t provide a livable wage or opportunities for advancement, said Henry Rock, founder and executive director of City Startup Labs’ ReEntry Entrepreneurship Program in Charlotte, N.C. In some cases, becoming an entrepreneur holds more promise.
“The kind of employment that gives them an opportunity to step up the ladder, those kinds of jobs are far and few between,” Rock said. “The option of starting a company makes a lot more sense for them when they’re facing those kinds of challenges.”
Lifestyle businesses can be ideal for formerly incarcerated people, as they are typically small businesses that allow owners to support themselves or their families, said Cathy Anderson, co-founder of the Carolinas Institute for Entrepreneurship. The institute provides business education and mentorship to inmates in Mecklenburg County, N.C. A lifestyle business could be a small restaurant or landscaping operation, and the business could be based on a skill they learned while incarcerated, Anderson said.
The initial goal for former inmates after returning home is finding employment, and Anderson suggested they find a job related to the industry in which they would like to start a business. That way, they could earn both industry knowledge and a paycheck.
“We want people to go find a job at a place where they think they might want to own a business,” she said. “We want them to have that education, and also an income flow, to begin to get themselves back on their feet.”
Often, former inmates feel as though they cannot open their own business because of their criminal past, Anderson said. But that’s not the case. Formerly incarcerated people have the same ability as anyone else to register a business with their state and start selling goods or services, she said.
“Nothing keeps you from starting a business,” Anderson said.
While you may not be barred from registering a business because of your criminal background, you may be limited to certain industries. Many states deny occupational licenses to felons, which would restrict the types of businesses they could start.
Here are answers to some other questions about operating a business with a criminal history.
Can you own a business if you are convicted of a felony?
Anyone can register a business entity with the state, including convicted felons, but you may not be able to obtain certain industry licenses.
Can you apply for a loan with a criminal record?
You can apply for a business loan, but you may be subjected to a background check. The Small Business Administration, for example, requires applicants to authorize a personal criminal background check so the organization can assess their character.
Can you get a liquor license if you’ve been convicted of a felony?
People with felony convictions can apply for a liquor license but would have to meet state requirements, which could include being of good moral character. You may not be able to obtain a liquor license if you previously had a liquor license revoked by the state.
Financial resources for felons
Upon returning home, former inmates often do not have the financial history required to get business financing, Rock said.
“The challenges that the formerly incarcerated are dealing with versus anyone else that’s trying to start a company are compounded by the fact that they might not have credit, or good credit,” he said. “And they don’t necessarily have friends and family to help launch the company.”
Bootstrapping is typically the best way to fund a business if you’ve been convicted of a felony, which is why it may be best to find work and secure an income before starting your own company, Anderson said.
Here are additional financial resource to which felons could turn:
Grants for felons:
The federal government grants money to eligible small businesses. You can search Grants.gov to find a specific grant program for your industry. Types of grants include scholarships, awards, prizes, fellowships and internships. Some grants fund community programs to assist formerly incarcerated people. For instance, the U.S. Department of Justice’s Office of Justice Programs administers Second Chance Act grants to state and local government agencies, as well as nonprofits, that help former inmates rejoin their communities. You could check for federally funded re-entry programs in your area that might provide resources for small-business owners.
A felony conviction doesn’t have to stop you from applying for a business loan. You may be approved for funding through loan initiatives such as the SBA’s microloan program. SBA microloans are reserved for low-income, minority, women and U.S. military veteran entrepreneurs in need of $50,000 or less.
Incarcerated people typically earn a low income before being imprisoned, and then only have access to low-paying jobs upon their release, keeping them in the low-income bracket. Although the gap between the number of white and nonwhite prisoners is shrinking, many inmates are of racial and ethnic minorities, according to the latest figures from the Pew Research Center. In 2016, 486,900 prison inmates were black, 439,800 inmates were white and 339,300 were Hispanic. Women also make up a sizeable portion of inmates. Nationally, there were nearly 110,000 women incarcerated in the U.S. in 2014. Military veterans comprise a smaller portion of U.S. inmates — 181,500 veterans were incarcerated in 2012.
Your best bet for securing capital may be finding someone willing to invest in your business, Anderson said. She works to connect small-business owners with people in their community willing to make an investment, but those investment amounts are typically small, she said.
Online crowdfunding platforms such as GoFundMe and Indiegogo could help you elicit funds from people outside of your immediate community. Some platforms allow you to accept money from the general public without offering anything in return, while others require you to exchange products or services.
Many organizations across the country teach current and former inmates skills to become successful entrepreneurs, such as the Prison Entrepreneurship Program in Texas. Many colleges also operate business programs for those with criminal backgrounds, such as Project ReMade at Stanford Law School and the Ohio Prison Entrepreneurship Program at Ohio State University. Connecting with people in these programs could lead you to potential business investors, Anderson said. Participating would also show dedication to your business and boost your reputation if you do decide to apply for a small business loan, she said.
The challenge of getting business funding is not unique to former inmates, Anderson said. Entrepreneurs, regardless of criminal background, should expect to spend some of their own money when starting out.
“Anybody starting a new business is going to have to fund some of it on their own,” Anderson said.
How to increase your chances of loan approval
Wait a few years.
Just like any small-business owner, formerly incarcerated business owners would increase their chances of being approved for a loan as the business becomes more established, Anderson said.
“When you’ve got it tested and proven, then you’ll get funding,” she said.
Taking steps toward personal improvement would make you look better in the eyes of a lender, Anderson said. Life skills classes, such as money management courses, would indicate you’re making an effort to improve your lifestyle, she said. You would also be able to meet members of the community who could help your business.
A lender would want to see that you’ve taken initiative to set up your business for success, Anderson said. She recommends formerly incarcerated business owners sign up for business classes at their local community college or check out business books from the public library. Shadowing a business owner in a similar industry would also boost your knowledge and skills.
“Those are really critical steps,” Anderson said.
Clean up your credit.
Having your personal finances in order when applying would help you get approved for funding, Rock said. Before submitting an application, it would be best to repair your credit profile and save at least three months’ worth of capital, he said.
In the ReEntry Entrepreneurship Program, participants learn how to form their business model and write a fully formed business plan. These pieces should be in place when you apply for financing to increase your approval chances, Rock said.
“We make sure that, whatever the business is, that the business model and plan is sufficiently well thought out so they would be in a position to potentially apply for a microloan,” he said.
It’s not uncommon for all new business owners to spend time improving their own finances before securing funding, Anderson said. Former inmates often think they can’t get a business loan because of the strikes against them, but they’re in the same boat as most entrepreneurs, she said.
“They just need to know they’re not in it alone,” Anderson said.