Every year, more than 670,000 inmates are released. Convicted felons have to deal with copious problematic tasks in reintegrating into society. As ex-convicts, trying to get back on your feet and finding a way to generate income are almost impossible.
Most ex-convicts decide to better themselves by going back to college or starting a business. But with limited financial resources under their belt, most former inmates have no choice but to rely on grants or loans.
Unfortunately, it is quite difficult to find loans or grants as ex-convicts to start your small business or to pay for college. However, there are still some options available for you, which you’ll learn about through this article.
What is a Grant?
A grant is free funding that doesn’t need to be paid back. It’s completely free and is provided by an individual entity, such as the corporation, the government, or a foundation. Generally, grants are given on the basis of needs. There are certain conditions that you need to fulfill and there’s no guarantee that you’ll qualify for the reward.
But don’t be discouraged. There are numerous grants out there for ex-convicts who wish to return to school or start a business. Both the federal government and private companies offer various types of programs that you can apply and qualify for.
What is a Loan?
Unlike grants, a loan refers to money that is given to you by a single or multiple individuals, organizations, corporations, or other entities based on an agreement that you’ll pay back the full amount with interest.
The interest refers to the percentage of funds you’re charged to receive the money. If your credit score is good, you can receive a low-interest rate. Nevertheless, there are small startup loans available for ex-convicts with bad credit. However, you’ll have to pay a high-interest rate. The financial counselor will walk you through all of these important details when you apply.
List of Grants and Loans for Ex-Felons
1. Federal Government Grants
The Grants.gov is a website that provides all the information regarding federal government grants that are available in the US. Being a large bureaucracy, the US federal government has 26 individual agencies offering more than 1000 grant programs.
Through Grants.gov, you’ll be able to search for government grant policies, open as well as closed grant opportunities. Furthermore, you can apply for grants. Do note that the Grants.gov doesn’t include grants from government entities that are below the national level.
Before applying, you need to see if you are eligible to get financial assistance through Grants.gov. Also, you’ll be able to apply for grants via Grants.gov only after you register an account first. You will also need to submit various documents to confirm your non-profit status.
2. SBA Microloans
Generally, it’s very difficult to receive SBA loans for startups. Your best option is to apply for the SBA Microloans, which is an excellent loan program for ex-felons for several reasons.
With the SBA Microloan scheme, the SBA (Small Business Administration) loans funds to nonprofit lenders. The lenders then offer business loans worth below $50,000. The average loan is around $13,000. Generally speaking, microloans are much easier to get as compared to standard SBA loans.
As most ex-convicts don’t look for loans above $50,000, SBA microloans are a great option. Having a felony record won’t disqualify you from receiving an SBA loan, but, a crime related to embezzlement or aggravated assault does.
3. Microfinance Loans from the State
As a felon, you can also seek financial aid from the State. There are several states that offer some sort of small business loans/financing for residents seeking startup funds.
The funds are relatively small and are generally under $5000 to $8000. Nevertheless, this might just be the required amount to help you get started. For instance, the California Opportunity Fund is among the best-funded schemes, however, there may be similar programs available in your area.
These types of funds are much helpful for felons as the TAT (Turn Around Time) to get approved as well as receiving the money is quicker in comparison to SBA loans.
4. Crowdfunding Websites
In simple terms, crowdfunding refers to a fundraiser for a cause or project by a large number of people online. If you are an ex-convict and is serious about starting a business, then you can benefit from this opportunity to get early-stage support for your ideas.
Generally, there are three variants of crowdfunding: equity crowdfunding, debt crowdfunding, and reward crowdfunding. With equity crowdfunding, the people who offer you funding owns a portion of your company.
When it comes to debt funding, you get a loan that must be paid back within a given period. Finally, reward crowdfunding is where you receive funds from supporters in exchange for a product sample or a small gift.
That being said, here are some of the top crowdfunding sites:
This is a popular crowdfunding site known for helping entrepreneurs fund their startups before raising money or getting a loan for venture capital. Since its establishment in 2009, Kickstarter has raised more than $4 billion and funded over 155,000 startups.
Also, fundraising through this site is simple. You need to set your goals first and a time frame to complete it. One thing to note here is that you need to get approved from Kickstarter first to start your campaign.
For every fundraised per individual, you’ll have to set a sample or a small gift for your donor. Also, Kickstarter is one of those all-or-none websites, meaning you won’t receive your funds if you don’t complete your campaign.
Additionally, the donor’s credit card will not be charged until you reach your campaign goal. Along with a 5% fee, there’s also a payment processing charge (which is 3-5%) per transaction.
Generally, fundraisers create campaigns for creative works, tech innovations, and community projects through this crowdfunding website. IndieGoGo works quite similar to Kickstarter, however, it isn’t an all-or-nothing model.
With IndieGoGo, you get two options: flexible and fixed funding. Flexible funding is helpful for those who will benefit from any sponsor. With flexible funding, you will receive funding even if you don’t meet your goal. On the contrary, all funds will go back to the donor if you fail to complete your campaign’s goal.
Fixed is a viable option for those who need a specific amount of money. Also, there are no fees for fixed funding for fundraisers who fail to fulfill their goal as compared to 5% for fixed funds and flexible funds that do complete their campaign’s goals. Additionally, there’s a 3% processing fee along with 30 cents per transaction. For both options, the minimum goal is $500.
Through this personal funding site, individuals have raised over $3 billion. Simply create a business plan and post it on social media. Since the website acts as an intermediary, donors feel confident in offering money.
Generally, most fundraisers prefer this site to raise funds for things like their medical expenses, education, or charitable donations. If you can develop a case that’s convincing enough for people to finance your business, this platform can be the best solution to get the required funding. The website collects a processing fee of 2.9% and 30 cents per transaction.
This site is the world’s largest crowdfunding platform that focuses on cultural, political, and social issues. It has 186 million members in 156 countries. It is a great platform for those who wish to build a fundraising community without having to spend much resources and money on networking.
Since it runs ads, the site doesn’t charge any fee. Through this website, you can collect pledges and donations, raise awareness, and provide relevant content to potential funders.
If you’re someone with a creative talent then this site will be of immense help. Unlike all-or-nothing platforms, Patreon works on a subscription basis where patrons regularly provide a set amount of funds per creation or every month.
Patreon has more than 100,000 active subscribers and 2 million patrons. The site allows you to build connections with fans and even share exclusive media to your Patreon subscribers as a way to continue getting funds from them.
The platform works best only if you share your work regularly, otherwise, subscribers have the option to cancel their subscriptions if you don’t provide content. Also, there’s a processing fee of 2.9% along with 35 cents per pledge.
This crowdfunding site offers personal loans of up to $40,000 and business loans of up to $300,000. It’s a type of crowdfunding that is easy to get and unlike regular banks, it’s much quicker. Plus, it doesn’t require things like business plans or visits and projects.
Through Lending Club, you can get loans with a 1-5 year term. The interest rate may be higher based on your credit – the average annualized interest is generally between 9.17-35.71%. LendingClub requires a minimum of 1 year in business, annual sales of $50,000, no tax liens or a recent bankruptcy, and a minimum of 20% business ownership. Simply put, you must have good financial health.
This is another popular crowdfunding site with over £70 million raised since its inception to help more than 80,000 individuals, businesses, charities, and community projects. Unlike most crowdfunding platforms, Crowdfunder has a distinct funding model. It has extra funding of £5 million from the private and public sectors for projects based on your campaign.
With Crowdfunder, you have to come up with a convincing case for promoting your campaign to your supporters after you have devised your plan and made your page on the platform. Crowdfunder can help raise over $50,000. Also, there’s no processing fee.
5. Funding options For Amazon Sellers
If you’ve ever thought of starting an online startup and marketing your products on Amazon, it’s not as difficult to accomplish as you may think. Recently, Amazon launched a loan program to help its marketplace sellers.
To qualify for this program, you need to be a seller, nevertheless, this initiative will help you grow your business considerably. They provide competitive rates, faster turn around time, and no paperwork is needed.
Amounts range between $1,000 -$750,000 with up to twelve months term based on your seller account. Amazon doesn’t provide the terms it offers, however, former borrowers report interest rates between 6%-16%
6. Local Producer Loan Program (Whole Foods Market)
If you are planning to start a business related to food or farming, then the Local Producer Loan Program offered by Whole Foods Market is a great option. Since its establishment in 2007, the company has made more than $22m in loans.
These loans are mainly for helping local food artisans and small farmers. You can get a loan worth between $10,000-$100,000 with minimum fixed interest rates. You cannot use the money for operating expenses. It should be used for capital expenditures and business expansion, such as purchasing more animals, new infrastructure and equipment, or expanding crops. Furthermore, you need to make payments every month on this loan.
7. Entrepreneurship Programs
There are various organizations nationwide that provide former and current inmates with information on how they can become successful entrepreneurs. One example of this is the Prison Entrepreneurship Program.
PEP (Prison Entrepreneurship Program) is a special fund that supports ex-felons even when they are still incarcerated. It was first founded in Houston, Texas, in 2004. The mission of PEP is to help ambitious felons pursue their entrepreneurial dreams. The success rate of the PEP in having a recidivism rate of less than 10 percent, which means 90 out of 100 people will not need to come back to prisons after joining the program.
Additionally, many colleges offer business programs for individuals with criminal backgrounds. Such programs are a great opportunity to connect with people and can help gain potential investors. Furthermore, ex-felons will even find solutions to all problems they may face when their business is beginning. There’s also a nonprofit community group known as the Inmates to Entrepreneurs that aim to help former convicts start their lives over as business owners.
8. Local Programs
There are various local programs across the country that are created specifically to help ex-convicts start their own business. You can check the following resources to see if there’s any program near your area.
- Local and state economic development organizations/agencies.
- Local churches or any other religious organization.
- Your city or state government offices/website.
- Your country’s government offices/website.
With over 300 chapters across the country, SCORE has been aiding people in starting and expanding their business for over fifty years. The mentors of SCORE include former business owners, current entrepreneurs, and professionals and they have been providing business owners and startups with free advice and consultation.
You can visit their official site to find the nearest SCORE branch or you can get mentoring online. There are also several resources, including webinars, articles, templates, online courses, and more.
10. Education Loans And Grants
Most felons decide to return to school after being incarcerated to receive training and education to get ahead and open opportunities for themselves.
Even if you are a felon, you can still qualify for education loans as long as you have a strong credit rating. You may also qualify for Pell Grants, which is a type of grant offered by the federal government to individuals who display immense financial need.
Do note that the federal student grant or Pell Grant is only limited to those who display significant financial need, have not received a bachelor’s, professional, or a graduate degree. In some instances, a person enrolled in specific post-baccalaureate programs may qualify for the federal Pell Grant.
If your felony is drug-related and was convicted while getting federal student grant, you won’t be eligible for federal student loans.
To qualify for education loans or grants, you must:
- Display significant financial need.
- Be either a US citizen or an eligible non-resident.
- Possess a legally accepted Social Security number.
- Be accepted or enrolled in an eligible certificate or degree course.
- Additionally, you need to have a GED or high school diploma.
How to Get Loans and Grants as Ex-offenders?
With a plethora of information out there on how to get startup loans and grants, it can be quite confusing to find a reliable solution. That said, the following tips can help in increasing your chances of getting loans and grants as ex-offenders:
1. Idea and plan
There’s a lot of inconvenience in searching and applying for financial supports once you are an ex-felon. Nevertheless, that cannot prevent you from getting better opportunities. The most important thing for you is to produce a strong and creative entrepreneurial idea as well as a solid plan. With these things, you will be more likely to receive financial aids. Start with a small business and expand it later.
2. Wait for a few years
Something that applies to every business owner; as a formerly incarcerated business owner, your chances of receiving grants or loans increases considerably when your company becomes more established.
3. Take initiative
By taking initiatives to improve yourself, you give out a good impression to your lenders. Life skill courses like money management programs would indicate that you are putting in the hard work and effort to better yourself. Through such programs, you may also have the opportunity to meet people who can help with your business.
As such, you should sign up for startup or business lessons. There are many non-profit organizations and colleges, as mentioned earlier, that offer free business lessons.
As for federal student aid like Pell Grants, you must meet certain requirements (some mentioned above) to get the reward. Most of the eligibility limitations will, however, be gone almost immediately after you’ve been released. You can even apply for the grant before you are even released.
These are just a few basic requirements for getting grants and loans for education. For more details on this topic, you should read Pell Grants for Felons – Everything You Need to Know.