Barriers for Small Businesses: People with Criminal Records

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Barriers for Small Businesses: People with Criminal Records

If you have a criminal record, that can affect your employment chances. Many companies do a background check on their future workers and refuse employing felons. The solution lies in establishing your company. But people with criminal records might encounter barriers even when launching a small business. Here are the obstacles you might face on your road to becoming an entrepreneur!

Difficulties of Starting a Small Business with a Criminal Record

The laws don’t stop felons from establishing a business. You have every right to register a company in the United States and most European and other countries. In addition, people with a criminal record can become sole proprietors or establish LLCs or partnerships.

However, you might face limitations in niches where you can work. For example, you need to pass a criminal background check to get a license for some businesses. Therefore, before you register a business, make sure to check the requirements in your desired niche.

Licensing Requirements

The requirements depend on your local laws. However, the general rule is that the authorities conduct a background check before issuing a license for medicine, law, or business involving weapons.

If you have a criminal record, the odds are you won’t get a license to open a firearm shop. Some niches also have special requirements, such as a surety bond. That includes mortgage providers, plumbers, and auto dealers. You can consult a skillful business attorney to learn about your odds of getting a license for the desired industry.

How Does a Criminal Background Check Affect the Process of Starting a Business?

Even if you get a license out of the way, it’s not the only problem you could face as a felon trying to start a business. Unfortunately, these challenges are also common among people with criminal records!

Funding for Your Business

It’s best if you have enough assets to cover the expenses of the initial phase of your business yourself. But that’s often not the case, so you should think about the funding.

Business grants are an excellent choice but focus on those that specifically aim for those with a criminal record. You don’t have to pay the grant back, so it’s debt-free. However, it’s harder to qualify for a grant.

Some incubators offer professional courses to felons, such as leadership, networking, etc. This will increase the odds of your business venture being a success.

Small Business Loans for Felons

Banks will usually reject a loan request for an ex-con. Fortunately, you have other options. Apart from considering loan money from friends or family, you can go for SBA loans.

The US Small Business Administration offers these loans to help felons get back on the right track. It helps if you belong to an underrepresented group, such as women or minorities. You can also apply for a loan and guarantee real estate or equipment. You use those as collateral if you can’t pay the debt back. Banks are more open to loans to ex-cons willing to offer collateral.

Having Partners in Your Business

A partnership business comes with some advantages compared to sole proprietorships, including:

  • First, it lowers the initial costs when launching a business.
  • This is because two persons often think and assess things better than one.
  • Second, the amount you can borrow will likely be higher.
  • Third, splitting the income might result in overall tax savings.

The best option is to have a friend willing to enter a business venture with you. It should be someone who knows you deserve a second chance. It might be hard to find a partner if you have a criminal record. That person will need to have an open mind, and their stance will probably depend on the severity of your criminal past.

Finding Investors

Landing an investor might be easier than searching for a partner for your business. Of course, it doesn’t mean investors are exactly eager to put money into a business led by a felon. But if you present the idea the right way, you can attract their interest.

It would be best to have a detailed business plan and a presentation that shows why your company is worth the hassle. Point investors’ benefits and how soon they can expect a profit. Investors’ perspective might not take a lot of their overall funding to invest in a small buThat’s. That’s why they might be ready to accept the risk, especially if your idea intrigues them.

Barriers for Small Businesses: People with Criminal Records