People who have been convicted of a felony in the U.S. can own and run a business, but there are challenges in doing so, including access to capital and overcoming prejudice against having been incarcerated. However, small business grants and loans, as well as other resources that may prove helpful in supporting an entrepreneurial vision, are available for formerly incarcerated people who are looking to start or run a business.

Can You Own a Business If You Have Been Convicted of a Felony?

There are no laws against owning a business as someone with a felony conviction on their record. In fact, a 2021 study found that more than 3.8% of U.S. small business owners have a criminal record, and 1.5% have a felony record.

However, starting a business requires capital to purchase equipment and tools, and having certain crimes on your record can render you ineligible for or make it difficult to pursue certain funding categories and small business insurance. However, there are funding opportunities and resources dedicated to supporting formerly incarcerated entrepreneurs.

Small Business Grants for People Who Have Been Convicted of a Felony

A small business grant is a type of funding for entrepreneurs that can be offered by city, state, and federal governments as well as private businesses, nonprofits, and charities. Unlike a loan, it does not need to be paid back, making it a highly desirable and advantageous form of business capital.

Grants are usually designed to help specific demographics or populations of people access funding, so they may be targeted at minorities, veterans, or certain business industries. Some examples of grants designated for formerly incarcerated people hoping to start a business include:

• Nav’s Small Business Grant: Although currently paused and under redevelopment, this grant awarded entrepreneurs with up to $10,000 to help them overcome roadblocks and achieve their dreams.
• FedEx Small Business Grants Program: This annual grant contest awards one $50,000 grand prize and nine $20,000 second-place prizes to business owners with a FedEx shipping account.
• NASE Growth Grants: These business development grants, offered by the National Association for the Self-Employed, can be worth up to $4,000 and are meant to help entrepreneurs with marketing, advertising, hiring, expanding facilities, and other business needs.

How to Get a Business Grant If You’ve Been Convicted of a Felony

Although every grant application is different and has its own application criteria, here is a general overview of what applying for a business grant might look like.

1. Identify a grant. Search online to find a grant that is currently or will be accepting applications. Some helpful places to look include Inmates to Entrepreneurs, Help for Felons and NASE.
2. Review the eligibility criteria. Ensure that you understand and meet the grant requirements, as some grants are designated for specific purposes or business types. Many grants are highly competitive and time-consuming to apply for, so investing time and effort into creating a strong application is a must.
3. Prepare any required documents or application materials. Some grants require you to prepare a detailed business plan or submit a video or other media in order to participate. Most grants require you to submit personal or business information as well, so it can be useful to gather those resources and have them handy for the application process.
4. Submit your application. Many grants will inform you of their decision-making or announcement timeline, so after submitting your application, make note of when you should expect to hear back.

Small Business Loans for People Who Have Been Convicted of a Felony

Another potential avenue for securing the necessary funding to start a business is a small business loan, and having a criminal record does not necessarily disqualify someone from obtaining one.

As is the case with grants, there are different categories of loans meant to address specific business needs, whether it’s starting a new business or developing an existing one. However, unlike a grant, a loan does need to be paid back, and your credit score may be a factor in determining potential eligibility, repayment terms, and interest rates. There are still options that do not require a credit check or for those with a low credit score, however.

Here are a few small business loans available to those who have a criminal record:

• SBA Microloan: For individuals who have a high credit score, this program is a great potential source of funding of up to $50,000, as the loans have some of the lowest interest rates available (generally between 8% and 13%).
• Kapitus Loans: For business owners who have been operating for two or more years, bringing in a minimum of $250,000 in annual revenue, and who have a minimum FICO score of 625, Kapitus can provide funding and financing from $10,000 to $500,000.
• Newtek Loans: Newtek’s loan programs are flexible when it comes to business type and funding amount. They offer the option to borrow anywhere from $1,000 to $15 million.

How to Get a Business Loan If You’ve Been Convicted of a Felony

Loan applications will vary depending on the lender and purpose of the loan, but here is a general overview of what applying for a business loan can look like.

1. Identify a loan. Information on loans can be found online. Some helpful resources include Inmates to Entrepreneurs, Help for Felons, NASE, and the SBA. 
2. Understand the eligibility criteria. Take the time to review the loan requirements and understand the interest rate, fees, and repayment terms. Some loans are designated for specific purposes or business types, so it’s important to be clear on what you’ll be using the money for. 
3. Prepare the required documents or application form. Application and documentation requirements will vary depending on the lender, but usually, the lender will require some form of collateral for the loan as well as some business and personal information, including financial documentation. It can be helpful to get these ready in advance of submitting the application so that everything is handy when the time comes.
4. Submit your loan application. After that, you should hear back from the lender on whether your application is successful and, if so, when you’ll receive the funds. Make note of any repayment terms or schedules to ensure that you are able to make repayments and that you are aware of any penalties around missed or late payments. 

Other Entrepreneurial Resources for Those with a Felony Conviction

Additional resources for formerly incarcerated people looking to start a business include:

• Inmates to Entrepreneurs: This national nonprofit offers entrepreneurship programs and resources for individuals with criminal records.
• Small Business Administration (SBA): This government agency is devoted to helping small businesses succeed, providing information, funding, and programming to entrepreneurs.
• Grants.gov: This official government website lists federal grant opportunities.
• Small Business Development Centers (SBDCs): These publicly-funded local centers provide free business consulting and low-cost training to business owners and are hosted by universities, colleges, state economic development agencies and private partners in partnership with the SBA.
• HelpforFelons.org: This organization assists formerly incarcerated people reenter the workforce and lists grant and loan opportunities.
• SCORE: This nonprofit organization, another partner of the SBA, provides free resources, mentoring, and education for entrepreneurs looking to start, grow, or successfully exit a business.
• Crowdfunding platforms: A business funding option that’s an alternative to grants and loans can be to fundraise on a website like Kickstarter, GoFundMe, or Indiegogo. 

The Bottom Line

Having a felony conviction on one’s record does not prohibit someone from owning a business and is not necessarily a barrier to pursuing an entrepreneurial dream. Although it can make it difficult to access traditional funding, there are options available, some specifically set aside to help people in their transition from prison. With research and determination, it is possible to start a business as a formerly incarcerated person.