It’s unfortunate and unfair that the mistakes in our past often prevent us from moving forward in the future. Such is the case for many of the nation’s former felons.
Felony charges on one’s record can make doing a lot of simple tasks in America very difficult. Finding employment becomes incredibly difficult, as well as the ability to apply for housing. In many states, like Florida until just this past year, former felons were no longer allowed to exercise their right to vote.
Another area of life harder for a felon? Getting a loan. But doing so doesn’t have to be impossible. Read on, and we’ll walk you through everything you need to know about small business loans for felons.
Why Is It Difficult For Felons To Get A Loan?
Despite the presence of many re-entry programs, it remains very difficult for released felons to reintegrate with society following their release from prison. Many of the jobs that become available to former felons don’t provide proper living wages or opportunities to advance or excel.
Some former felons make the decision to try starting their own businesses and take opportunity into their own hands. There’s no restriction in any state that limits the ability of a felon to register a new business.
Where the difficulty comes in is the felon’s ability to raise funds for their new business. Felons are allowed to apply for a small business loan, but background checks are a common part of the process.
With a felony charge on your record, it can be incredibly difficult to get approval for a loan. In addition, following long-term imprisonment, most felons don’t have the financial history required to be approved.
Preparing To Apply For A Loan
If you’re a felon in need of a loan, there are a few steps you should take to prepare. First, consider if you really need a loan. Can your potential business idea start small and build up over time? Starting a business without start-up funds can be difficult but doesn’t have to be impossible.
If you are going to apply for a loan, make sure to do your homework ahead of time. Create a practical and well-organized business plan. Be realistic about the amount of money you think your business can make and your timeline to pay the loan back.
Before applying for a loan, take some time to try and get your credit score back on track. The more you can do to create a picture of rehabilitation and responsibility, the better. Even with a good track record behind you, getting approval can be difficult. There are a few other methods one could try.
The Small Business Administration has been known to give loans to felons depending on the individual’s personal history. In many cases, the kind of crime committed will lead the SBA to decide whether to grant approval to a loan request or not.
The SBA has a variety of loan programs available. These are the SBA 7, CDC, Line of Credit loan, Export loan, Disaster loan and Microloan. The Microloan is the program most likely to produce positive results for former felons.
The SBA first lends this money to nonprofit investors, who then invest that money into new small businesses. These loans are usually fairly small, about $50,000 or less.
These loans can’t be used for refinancing or any sort of real estate, but they can be used to cover all of the start-up costs typically associated with starting a new business. Inventory, materials, labor, equipment, and so forth could be covered under such a loan.
As we mentioned previously, you’ll likely want to have a solid pitch and business plan when attempting to apply for this or any loan. These types of lenders are generally more flexible and open than the larger institutions.
But these loans aren’t going out to just anyone, and you’ll need to prove to the lenders that you’re worth taking on the risk.
Peer to Peer Loans
Peer-to-peer loaning connects people looking to borrow to people looking to lend. Since peer to peer loaning focuses on connecting two individuals, it can be sometimes easier to get a loan this way than attempting to receive one from a big institution.
Many peer-to-peer lenders don’t require background checks. For this reason, your prior history will have less of an effect on your ability to get a loan. Approval from a loan can happen as quickly as in a few minutes, depending on who you speak to.
Many peer to peer loans happen online nowadays. Different websites allow individuals to apply for a loan and then be connected with different interested individuals.
But a peer-to-peer loan is like any other and requires monthly payments and high risk to your credit score. Before taking on a peer-to-peer loan, you should ensure that you can afford to make those payments. Otherwise, you’ll be sinking your business before you really even get started.
Small Business Loans For Felons
Most released felons just want to return to their lives and get back to work. But their criminal history can make it very difficult to take the opportunities that so many in America take much more easily.
The above options are just a few ways one can find small business loans for felons. Finding the proper lender can be a process. But the ability to get back on one’s feet and find new independence is worth all the struggle involved.
Need more assistance or advice? Reach out to us any time.