Business Grants for Felons

Convicted felons face multiple obstacles to reentering society after incarceration, including potential barriers to securing long-term employment. With some hiring managers resistant to hiring an individual with a criminal history, starting a business could be an option.

But while there may be significant barriers for formerly incarcerated individuals pursuing entrepreneurship, there are grants and business resources for ex-felons to start a business. Federal and local governments may offer small business grants for felons that typically wouldn’t require repayment. Entrepreneurship programs for business mentoring and skill development are available, too.

Grants for felons: 3 places to find funds

Starting a business can be challenging for anyone, but especially for ex-felons who may not have enough income or savings to bootstrap, as well as facing potential difficulties in qualifying for traditional financing with poor or insufficient credit. The following grant opportunities offer free capital that typically does not need to be repaid.

Federal grants for felons

Though the federal government generally does not offer direct grants to start a business, ex-felons could be eligible for federal grants made through nonprofit and educational institutions. The Rural Innovation Stronger Economy program, for example, offers grants to rural jobs accelerator partnerships to spur business and job growth in low-income rural areas. Though, there are some cases where grants are available to individual companies: The Small Business Innovation Research Program provides small business funding related to research and development and high-tech innovation, for instance.

Federal grants programs generally don’t target former inmates; however, one exception is the Second Chance Act Community-Based Reentry Program under the Department of Justice. Approved applicants can use the funds for programs that mentor adult offenders during incarceration and assist them in reentering the real world.

Grants.gov is a good starting point in your search for a federal grant. It’s a government-based database that organizes thousands of federal grants available to applicants from different backgrounds and industries.

State grants for felons

Small business grants for felons are also offered at the state and local levels. Similar to federal grants, they are available to ex-felons but generally do not target them.

Ex-felons can secure business grants at the state level. Some state governments may offer business grants to encourage economic growth within their state. Ohio, for example, created The New Small Business Grant for businesses established in 2020. Eligible business owners can qualify for up to $10,000, which can be used to support the survival and stability of their enterprises.

Some business grants target specific counties, too. The MicroEnterprise Grant program offers grants up to $25,000 to small businesses in Montgomery County, Ohio. Targeting socially and economically disadvantaged businesses, this grant can be useful for ex-felons who have not been in business long and are generating little revenue.

Some state grants target applicants from certain backgrounds. As an example, Prospera — whose motto is “Advancing Hispanic Business — works with entrepreneurs from that community located in Central and South Florida. This economic development nonprofit organization offers bilingual assistance and business development services free of charge.

Entrepreneurship programs

While entrepreneurship programs do not provide direct funding, they offer valuable skill development courses, mentorship and other resources. Some organizations even work with individuals while incarcerated, preparing them for entrepreneurship after being released.

Noteworthy entrepreneurship programs that target inmates and ex-felons include:

• Defy Ventures: Defy Ventures’ various programs equip entrepreneurs with the skills and habits for launching and growing a new business.
• Prison Entrepreneurship Program (PEP): Under PEP’s six-month entrepreneurship program, participants work one-on-one with volunteers to brainstorm business concepts, work on their business plans and learn other business skills. Graduates earn a Certificate in Entrepreneurship from Baylor University’s Hankamer School of Business.
• Inmates to Entrepreneurs: With their free online eight-week course, students can learn the basics of starting, running and growing a business. They learn various business skills, from business ideation and marketing to sales and customer service. Graduates earn a certification of completion.
• Project ReMADE: This 12-week entrepreneurship training program teaches formerly incarcerated people basic business skills, including accounting and negotiations. Program graduates can then present their business plans to a panel of executives and participate in a completion ceremony held at Stanford Law School.
• The Last Mile: This nonprofit organization teaches valuable business and technology skills to incarcerated and post-incarcerated individuals. Inmates can work in their web development shop on client-funded projects and build their portfolios before entering the tech job market after being released.

Other financial resources for felons

In addition to government grants for felons, former inmates can secure business funding through angel investors, business loans and crowdfunding platforms. These financing solutions may be options for those who are capable of taking on debt or willing to give up a portion of their business ownership.

Angel investors for felons

Angel investors are high net worth individuals who provide financial backing to new businesses. In exchange for investing their own money, angel investors sometimes receive a stake, or equity, in the company.

Not all angel investors are profit-motivated the way many commercial lenders are — some genuinely want to offer their support in helping startups achieve liftoff. They may even refer their own consultants or executives and play an active role in the growth of your enterprise.

Rising Tide Capital, for example, is a nonprofit organization that aims to “transform lives and communities through entrepreneurship.” This organization has provided educational resources, networking opportunities and financial capital to those living in underserved urban neighborhoods.

Business loans for felons

Some ex-felons have poor credit, which can make it difficult to qualify for lenders that require credit scores and extensive business experience. The time spent in prison may have limited the abilities to build credit history or gain real-world experience. Fortunately, microloans from the Small Business Administration (SBA) and online lenders typically carry more lenient requirements that can help.

SBA microloans can come in handy for ex-felons that need up to $50,000 to launch their startup, but don’t qualify for a conventional bank loan. This SBA program targets business owners from disadvantaged backgrounds: It helps provide business grants and resources for women and minority entrepreneurs, as well as working with bad-credit applicants. Notably, in 2015, the SBA extended microloan eligibility to small business owners on probation or parole.

Online lenders are also serving borrowers who do not meet the stricter requirements of traditional commercial lenders. For those who want to make moves quickly, some online lenders will provide funds within days. The relaxed requirements and fast funding can come with some drawbacks, however — typically higher interest rates and smaller amounts.

Crowdfunding platforms

Crowdfunding platforms, like Kickstarter and GoFundMe, allow individuals to raise funds from the general public. This financing option has relatively low risk, since you typically aren’t required to repay any funds you raise — even if your startup goes belly-up. Since there are no minimum time-in-business or credit score requirements, crowdfunding can be a viable alternative for those who don’t qualify for traditional financing.

While repaying the capital you raise isn’t always required, you may still need to offer something for your investors’ support. Many crowdfunding campaigns offer tiered rewards — the more you contribute, the more you win. A food truck startup may offer a free lunch voucher, for example, or a clothing company may give away free t-shirts. In some cases, you can also crowdfund capital by giving up small ownership shares to your contributors.

Since crowdfunding typically involves contributions from a large number of people, marketing your campaign can be time- and labor-intensive. You should also be conscious of any fees a crowdfunding site might charge: Kickstarter and Indiegogo, for example, collect credit card processing fees and a percentage of your funding total.

FAQs

Can you own a business if you are convicted of a felony?

Yes, there are felons who have founded their businesses after incarceration. Keep in mind, however, that ex-felons may be subject to background checks when applying for financing. In addition, industry-specific licenses may also be unavailable to formerly incarcerated individuals.

Can felons get federal grants?

Yes, federal grants are available to ex-felons. Note that federal grants typically target nonprofit and educational institutions, which may then use the funds to provide resources for ex-felons.

How do I qualify for a business grant?

The eligibility requirements can vary by the type of grant and grantmaker. Some grants may require a business to employ below a certain number of employees or meet revenue and time and business requirements. Other grants are reserved for a geographical area or a specific industry.

Can felons get business loans?

Yes, felons can obtain business loans and may benefit from loan programs that target those from underserved backgrounds, such as small business grants for minorities. A criminal history, while an unfavorable factor to some lenders, is not an automatic disqualifier.

Can I get a business license if I’ve been convicted of a felony?

Ex-felons may be unable to secure a business license depending on the state and industry. Some licenses may have restrictions based on how recently you were convicted — no convictions within the past five years, for example.