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Starting a business is difficult for any entrepreneur, but it’s even more challenging for people with a criminal record. A felony or criminal history of any kind can put you at a big disadvantage, particularly when it comes to getting small business loans .
Despite the obstacles, people have turned their lives around after serving time in prison and gone on to have lucrative careers as entrepreneurs. Popular examples include rapper-turned-entrepreneur Curtis “50 Cent” Jackson and Dave Dahl, co-founder of the nationally distributed bakery line Dave’s Killer Bread.
In some cases, having a criminal history might automatically land your loan application in the rejection pile. However, if you diversify your search enough, you should eventually be able to qualify for a business loan. Find out which are the best types of business loans for felons and how to convince a lender to approve your application.
Try debt-free financing first
When you’re searching for business financing, business loans shouldn’t be the only eggs in your basket. It’s likely that you’re not in a good place financially if you recently served time in prison for a criminal conviction. Your credit score might be a mess, you could have a lot of unpaid debt and you don’t have a steady income stream. Given these realities, qualifying for a business loan is a big hurdle.
As a first step, we recommend applying for business grants that are open to people with a criminal record. There’s a big difference between a grant and a loan. A grant is a reward of money that you don’t have to pay back, whereas you payday loans Maine have to pay a loan back with interest. If you’re able to qualify for a business grant, then you can use that money to grow your company debt-free.
Another option is to apply to incubators that specifically help ex-cons, such as Defy Ventures and Inmates to Entrepreneurs . These incubators provide leadership training, executive coaching, networking opportunities and even some financing to help former inmates start businesses.
Crowdfunding platforms like Kickstarter and Indiegogo are also good platforms to tell people about your business. They’re open to anyone over 18, even if you have a criminal record. If your business concept resonates with the audience, they can contribute monetarily. In exchange, you give your supporters product samples or a small discount.
Take the company Lazlo as an example, which has brought in over $30,000 on Kickstarter. Lazlo employs former inmates to produce and sell sustainable clothing.
Best business loans for felons
If you have a felony or other crime on your record, you’ll need to get a little creative in your business loan search. You’ll likely need to try out a few different options before something clicks and you’re able to get the money you need to launch.
Family and friend loans
Loans from family members or friends are among the best business loans for felons. This is how the nationally distributed bakery brand Dave’s Killer Bread came to be. More than anyone else, your family and friends intimately understand the circumstances that led to your conviction, and they will be supportive of your efforts to become a business owner. Although one family member or friend might not be able to help much, small loans added up might be enough to seed your business’s growth.