How to Start a Small Business with a Criminal Record

Starting a small business is rarely easy, and there are often some associated challenges, but it can be even more difficult if you have a criminal record. Fortunately, your chances aren’t totally out of the window. There are plenty of opportunities to start and run your own small business if you have a criminal record, but there are also obstacles to overcome. It isn’t necessarily easy, but you may even be able to pass a criminal background check if you can get your felonies expunged or if they have expired. Let’s learn how to start a small business with a criminal record.

Difficulties Of Starting a Small Business with A Criminal Record

While a criminal record will not make much of a difference in some industries, there are industries where it does. For instance, if you plan to work with children, certain things can cause you not to be able to start your business, especially if you have relevant convictions.

In such cases, consulting with a criminal defense lawyer specializing in record expungement or providing legal advice for entrepreneurs with criminal histories can be a valuable step in navigating these challenges.

Can A Convicted Felon Get a Business License?

Rules vary from state to state, but you aren’t automatically excluded from getting a license to operate if you have a felony. It depends on the severity of your offense.

Can A Felon Get An LLC?

Felons may be able to operate an LLC. There is no harm in doing so, but remember that there is a lot of paperwork, and you must file Articles of Organization and pay certain fees. Ensure that you have followed the rules in your state to keep your LLC operating. This is also just one of the arrangements for a business.

Can You Get a Bank Loan with A Criminal Record?

Different banks have their policies regarding lending and criminal records, but it can prove challenging, especially if your offense suggests poor handling of finances. There are some specialist loans for criminal records.

Best Business Loans for Felons

Though your options might be more limited as a felon, there are ways to get business loans as a felon.

Family And Friend Loans

Borrowing from family and friends has its pros and cons. It is more likely that you can borrow money, but if you don’t pay it back, you could cause a frayed relationship. 

SBA Loans

The Small Business Administration is all about supporting small businesses in America, and this can include funding. Check what they currently have available. 

Equipment And Real Estate Loans

If you have equipment or property to borrow against, this can increase your chances of getting a loan.

Online Short-Term Loans

Many lenders are providing short-term loans online, but these aren’t always the best in their terms. 

Invoice Financing

If you have invoices and are waiting for payment, you can borrow against those invoices. It’s a good option for lenders as they can guarantee the money is coming.

Merchant Cash Advances

MCA providers usually provide you with a sum up front that you must repay, but they then get a percentage of your future sales. 

How To Strengthen Your Loan Application

You can strengthen your application for a loan by providing equity or a potential item as security. This might increase your chances of getting accepted and being able to borrow the money you need to start the business.

How To Find Investors for Your Small Business

Finding investors is another potential option that may allow you to start your business. This could be friends, family, or former colleagues, or you could try talking to local angel investors. You might find the financing you need.

Small Business Grants for Felons

A grant might also be suitable. Some organizations provide grants for felons to help them focus and rehabilitate. 

Your Correctional Facility

Check with your local correctional facility if they have any training or business grants. This can be hit-and-miss, but employees can point you in the right direction.

Your Community

You may find organizations willing to help small businesses in your local community. 

HelpForFelons.org

Help for felons is an organization to “help felons with jobs, housing, loans, and other needs/resources”

Inmates To Entrepreneurs

Another scheme that can help people start businesses after jail is Inmates to Entrepreneurs, which provides advice and training.

Federal Education Loans and Business Grants for Felons

Federal loans and grants are a good way to access support and raise money to get your idea off the ground.

Grants.gov

Grants.gov will show you available programs you can sign up for and benefit from, including grants. This is a great database for grants, and it is worth checking. There are also instructions on applying.

SBA Microloans

The SBA is all about helping small businesses, and their microloans program might benefit those looking for small funding levels.

Freelancer Marketplaces

A freelancer marketplace can be a way to raise funds, and some even have grants to help people start their careers.

The Federal Trade Commission

The FTC has business grants, especially within specific industries, but certain scammers claim to be from the FTC, so make sure you go straight to them and verify your identity.

GoFundMe

If you have a compelling story and a business idea, you can accept donations from people on GoFundMe. This allows a lot of people to chip in.

IndieGoGo

It is similar to GoFundMe in that it is crowdfunding, but this relies on you sharing your idea on the platform and often providing something in return for investment, like a preorder for a product you will be launching.

Small Business Development Centers (SBDCs)

If you have a local SBDC, then it is worth contacting them to arrange a visit or ask them about potential funding options for your business.