Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.
As many as 100 million people in the United States (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, find it difficult to find employment.
More than 60% of people who have ever spent time behind bars are unemployed for at least a year after their release. Those who manage to find a job earn about 40% less than the general population. When you consider the fact that more than half of those incarcerated in state and federal prisons have minor children, the numbers become more concerning.
Ex-criminals face unique challenges as they attempt to make a living after incarceration. It’s no wonder, then, that many people in this position are drawn to the idea of starting a business. The Rand Corporation estimates that more than 3.8% of small business owners in the United States have a criminal record and about 1.5% have a criminal record. These percentages represent over one million small business owners.
Unfortunately, many criminals who are desperate for a fresh start still face unequal challenges as entrepreneurs, especially when it comes to business financing. However, there are resources, such as grants and small business funding, that can help ex-felons achieve their business aspirations.
Featured Partner Offers
$5,000 to $250,000
$6,000 to $250,000
Time spent in business
$5,000 to $500,000
Time spent in business
5 Small Business Grants for Criminals
Starting a small business takes a lot of effort and access to capital can go a long way. Many small business owners rely on money they have in personal savings or income from another job to help fund new business start-ups. Yet these resources are often not available to former criminals.
Small business grants are a potential solution that could help you find the capital you need to start or expand a business. The biggest advantage that grants have to offer is the fact that you don’t have to pay them back. Due to this advantage, however, you might face a lot of competition during the application process.
Below are five small business grants that criminals can consider.
Grants.gov is a system that can help small business owners — criminal or otherwise — discover grant opportunities from over 1,000 federal grant programs. To get started, 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-criminal business owners (and others) research funding opportunities. The system features details on nearly 28,000 grant programs, including nearly 1,200 small business grants.
You will need to subscribe to the service to access the full database. Membership costs between $18 per week and $199 per year. However, there is a free membership option that can provide you with limited information about certain grants for free.
3. FedEx Small Business Grant Competition
Through the FedEx Small Business Grant Contest, ten small businesses are awarded grants of up to $50,000 and $4,000 in FedEx Office and Small Business Printing Services. Other winners may receive small business grants (up to $20,000) and other benefits as well.
The contest entry window is closed this year. But you can check the eligibility criteria online to prepare for the next round of grant applications. FedEx reserves the right to perform background checks on finalists.
4. State and Regional Small Business Grants
Your state, county, or city of residence may also offer small business grants to entrepreneurs in your area. You may also be able to find grant programs designed for ex-criminals (or at least those that don’t exclude people with criminal histories) by seeking resources from organizations such as:
- Economic development poles
- 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 business stimulus grant program offers recipients up to $100,000 in grants to cover rent, lease or mortgage payments. There are many small business grant programs available in various locations in the United States.
5. Federal Small Business Grants
A past felony will generally not disqualify you from federal grants. But you also might not find many federal grant programs designed to help ex-felons get a second chance.
If you are interested in federal business grants, consider searching Grants.gov first. Beyond small business grants, remember that you can also access other types of federal grants.
The Pell Grant, for example, is a need-based form of federal student aid that could help you. You can use a Pell Grant to cover tuition for traditional college courses or business-related training that could provide you with the certification you need to start your desired business.
3 small business loans for criminals
In addition to small business grants for criminals, a small business loan can also help you achieve your business goals. Consider these three options:
1. Microloans from the United States Small Business Administration (SBA)
SBA loans can be an affordable way to find financing for your small business. However, loans have a reputation for being subject to strict eligibility criteria and for being tedious and slow.
If you’re considering this type of financing for small businesses, SBA microloans may be one of your best bets. The program offers qualified borrowers loans of up to $50,000 through SBA-approved lenders.
The SBA does not disclose any eligibility restrictions relating to criminal records with SBA Microloans. However, you must be prepared to provide a guarantee and a personal guarantee.
2. Online Small Business Loans
Online small business loans can offer many different options to help you achieve your goals. And while some online loans don’t have the lowest interest rates or most attractive loan terms available, they often offer flexibility you won’t find with other funding resources like traditional financial institutions. .
As a former felon, you may face barriers that may make it difficult to qualify for business funding. However, depending on your situation, you may be able to find a small business loan online that’s right for you, including:
3. Business credit cards
Business credit cards can be another good source of funding for some ex-criminals. With many business credit cards, you don’t need to establish a business credit score to qualify. Income requirements also tend to be more lenient with business credit cards, especially compared to business loans and other small business financing solutions.
On the other hand, your personal credit history and credit score will always have to meet the minimum requirements of the credit card issuer. If your personal credit is not in top shape, you may need to improve your credit score before applying for business credit cards with stricter credit score qualifications.
5 small business resources for criminals
Aside from small business grants, loans, and credit cards, there are a few other programs that could help you start a business as a former felon.
Help for Felons is an organization that aims to help ex-criminals 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 could make life after incarceration easier.
2. From Inmates to Entrepreneurs
Inmates to Entrepreneurs is a non-profit organization that aims to help ex-criminals create a better future for themselves and their families. The organization offers many 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, including criminals, 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 aspiring entrepreneurs. An SBDC can provide advice in areas such as business development, access to business capital, and business financial management.
Crowdfunding is one type of online tool that you can use to raise money for your business, and in some cases it can be life changing. Platforms like Kickstarter, GoFundMe, and IndieGoGo give you the opportunity to share your story with others and campaign for donations that could help fund a new venture.
5. Angel Investors
An angel investor is someone who offers private financing to a start-up business. In exchange for financial support, the angel investor often demands some form of compensation – perhaps equity in your business or future royalties. You will usually need to prove that you have an attractive business idea with a good chance of financial success (or market disruption) to attract such investors to your project.
There are also non-profit angel investors who operate with different motives. Rising Tide Capital, for example, is on a mission to help individuals and communities improve their lives through entrepreneurship.
Find the best small business loans of 2022