*We’re all about helping you make good business decisions, so any opinions or views expressed in our blogs reflect that of our editorial team only and not FaaSfunds, LLC as a whole.

Second chances are important. That’s why making sure that business loan options are available to everyone, including felons, helps give individuals second chances regardless of their past. Business loans for felons can be hard to find, but not impossible by any means.

The U.S. houses 25 percent of the global incarcerated population. With so many individuals going through the prison system, there’s often not a way to ensure their homogenization and success after their release. It’s much harder to find employment because of their status as a felon, and that makes it much harder to assimilate and go back to living a regular life. Felons are 50 percent less likely to be offered a job, and when they are, they make 40 percent less. These roadblocks to success don’t make productivity any easier, so entrepreneurship is often an attractive and logical option for former inmates. For felons looking to start their own business, there can be several funding options. 

Is Success Possible?

There are quite a few well-known successful formerly incarcerated entrepreneurs, like Dave Dahl, founder of Dave’s Killer Bread, Performance Two founder Georgia Durante and Pigeonly founder Frederick Hutson. These are large-scale successes, but there are surely thousands of locally successful ex-convicts around the country. 

Andrew Medal, an ex-convict turned entrepreneur, writes for Entrepreneur Magazine that there are several factors that make former inmates ideally suited for entrepreneurship – they’re experts at bootstrapping, familiar with the unknown and know how to take healthy risks. These factors, however, don’t show up on a credit report. What’s it like trying to get a business loan as a felon? 

The Unfortunate Facts

If you’re looking for business loans for felons, it may not be an easy feat. When you get out of jail and don’t have a steady source of income, the reality of the matter is that your credit score is likely less-than-stellar. This makes qualifying for a loan considerably harder. It’s best to start off with some sort of debt-free financing, if possible. Debt-free financing is exactly what it sounds like – a version of business funding that requires no credit or repayment. One type is a business grant. 

Business Grants

Before you focus on business loans for felons, you might want to look into grants for felons. There are entire organizations designed specifically for ex-convicts and felons looking to turn their life around and become entrepreneurs, and several of them offer grants or funding help. Unlike loans, grants don’t have to be paid back, and many are designed to boost small businesses and jump-start careers for underserved entrepreneurs.

A great place to begin is grants.gov, where you can search for federal government grants that match what you’re trying to achieve. With this option, you might not find many designed specifically for felons, but you can look for ones designed for either the type of business you’re trying to start, or ones centered around your nationality, heritage or identity. Local governments and religious organizations often will have resources and programs designed to help felons achieve success, so it’s also a good idea to start by looking hyper-local.

Help For Felons is a website designed to help ex-cons assimilate into society. They don’t specifically offer grants, but they do offer tons of business-applicable tips. Nonprofits like Inmates to Entrepreneurs help ex-cons get information and access to the things they need to start their own businesses. They’re also an incubator, which is a program that provides training, coaching, networking and financing. Defy Ventures is another similar program focused on “humanizing connections” and has a range of programs from incubators to entrepreneur boot camps.

Crowdfunding

If you think your product or idea could gain traction quickly, and people have expressed interest, it might be worth starting a crowdfunding campaign. Sites like Kickstarter and Indigogo have proven to be successful tools for entrepreneurs in raising capital for their business ventures, and they don’t care if you have a criminal record. Crowdfunding is a form of fundraising where people donate online in support of your product. Depending on the platform you use, donators receive either equity, swag or a version of your product. 

Business Loans for Felons

  1. Equipment financing

If you’re looking for business loans for felons and your venture requires large equipment to get started, or even real estate, equipment loans are “self-securing.” The equipment or property acts as collateral to secure the loan. This means that you won’t require extra collateral to get them, which is good if you’ve just been released from prison and don’t have the best financials. Lenders are more inclined to give loans to people with less-than-stellar credit if the loan is secured, so your criminal history is not as important as it would be with other loans.

  1. Online Lenders

Online marketplace lenders are able to be more flexible on terms and qualification requirements than traditional banks – sites like Kabbage, OnDeck or Lending Tree. These could be easier options if you’re a felon looking for a business loan. These options do, however, cost more in interest than a traditional bank loan, but are usually quicker to acquire. 

If you have a criminal record and are looking to fund your business, or are trying to keep track of your business credit, let FaaSfunds help. We’re here to make sure you make the best decisions for your business.

It’s normal to want to pay upfront, but don’t feel bad if you can’t – very few small businesses are in a position where they can fork over the full cost of pricey equipment all at once. It’s stressful to pay $5,000 one time at the cost of struggling to make ends meet for several months. That’s why equipment financing is important to consider.

But the idea of financing can sound stressful, too. All those payments? All that interest? Ultimately, financing isn’t an end-all, cure-all when it comes to your finances. When you use it correctly, however, it can help to maximize what you get out of your business. Want to know what we think the benefits of equipment financing are? Go ahead, keep reading.

Maximize Cash Flow with Equipment Financing

What does it truly mean to maximize cash flow? There are so many variables when it comes to using your working capital and revenue, but equipment financing can be a step you can take toward that financial nirvana of “maximizing cash flow.” 

PNC Bank says this is the “most attractive benefit of leasing,” and we have to say we agree. Leasing and financing let you keep your cash coming in and still benefit from the equipment you need. If you spread out a large purchase into several smaller payments, it gives your company room to grow from the purchase, and not suffer from a large, one-time payment.

Say you’re grossing $10,000 per month from your business, but you need a piece of equipment for $10,000. If you use that entire month’s earnings to purchase it upfront, it would set you behind on several other bills and expenditures. If you split that purchase into 24 payments of $417 (plus interest, of course, which will vary by lender and financial history),  it keeps your cash flow open for other opportunities, and you don’t have to stress about catching back up to the money you spent all at once. It also gives you a way to plan for the expense as opposed to just roughing it, and that can help make your cash flow more manageable.

Tax Incentives

That’s right, the government likes it when you finance. Payments could be tax-deductible, and you could write them off as an operating expense under the Financial Accounting Service Board’s (FASB) Statement 13. FASB 13 establishes what qualifies as an operating lease, and you can read more about if your lease would qualify here

Make sure you always consult your accountant or tax professional when it comes to tax deductions, though. 

Conservation of Capital

Equipment financing conserves existing capital for other payments, and doesn’t use up your credit card or line of credit. That means all these resources are reserved for other expenses or emergencies. Even if you have the existing cash to purchase a large piece of equipment, that cash could be better spent on another investment, or saved for an unexpected emergency purchase. 

Fast Financing

Equipment financing tends to be a faster way to fund purchases than a loan or line of credit, especially if you apply online through the lending marketplace. You can get approved for a maximum in minutes. 

Building Credit

And perhaps one of the most important reasons to get any type of financing is that it helps you build business credit. Unlike personal credit, your business credit doesn’t acquire automatically –  you have to personally report your credit to a business credit agency. So, if you’re not doing that, you don’t have any business credit built up. If you’re not receiving any financing, you don’t have a way to report and build that business credit, and that can be a problem later on. If you can separate your personal and business funds, it will be easier in the future to get a loan on behalf of your business. 

Use equipment financing to build your business credit by making on-time payments. This way, you can have a better chance to get a lower-interest loan in the future, or refinance for a lower interest rate. 


Looking for equipment financing? FaaSfunds has you covered. We match your business with the best financing options based on your financial history, instantly. Check us out below.

Equipment financing is used specifically for large equipment purchases – like industrial kitchens, company vehicles or even party inflatables. Getting an equipment loan is usually the most convenient way to purchase new equipment for your business. Usually, it’s an inevitable purchase – if your equipment is outdated you need to update it, or if you’re starting a business, you certainly need equipment. Getting a loan makes those purchases just a little bit easier.

You use equipment financing loans the same way an individual would use a car loan. You receive the sum of the loan upfront and then pay it back via monthly payments. New equipment can help your business bring in more revenue – whether it be a van to help deliver catering or another oven to meet higher demand. Handing over the cash for these purchases can set you back significantly, and that’s what makes equipment financing an attractive option for expanding, starting or updating a business.

If you’re going to a large equipment vendor, like John Deere, they’ll usually offer in-store financing for your business. Smaller or less-broad vendors will not, so you have to go through a bank or other lender to get the funds you need to pay the vendor up-front.

Do You Qualify for Equipment Financing?

Most businesses in good standing can qualify for equipment financing loans. Since the equipment you’re financing acts as the collateral, these loans can be easier to secure if your credit is less than stellar. Lenders are interested in securing a loan, so when you’re financing equipment, they’re often not as concerned with your borrowing history because if you can’t pay the loan back, they’ll just seize the equipment. This way, they don’t lose any money, so they’re more likely to be a little generous with their lending. The details of how much the loan will be for and for how long depends on the type of equipment and how much it costs. If you plan on investing in a piece of equipment that will retain its value with time, then lenders will often be willing to work with you, even if you don’t have the best finances.

Be aware that the term length depends on the type of equipment and its expected lifetime. Most lenders will not extend the loan payments past the lifetime of the equipment – they want it to be a tangible asset that’s worth something should they have to repossess it.

How to Apply

Like most loans, you’ll need to provide the financial health of your business along with your credit score. Most equipment lenders will also ask for information about the equipment you’re looking to buy and a quote of how much it will cost. The documents you’ll need are:

  • Driver’s License
  • Voided business check
  • Bank statements
  • Business tax returns
  • Credit score
  • Equipment price quote

What’s the Difference Between Equipment Financing and Equipment Leasing?

Some equipment sellers offer the option to lend equipment directly to their customers and charge a monthly rental fee, much like renting an apartment. With this option, you can only use the equipment while you’re paying for it, and no matter how long you use and pay for the equipment, you don’t own it. This is a good option if you only need equipment – like a forklift or a van – for a shorter period of time.

If you chose to finance equipment with a loan, you’ll own the equipment when you’re done paying for it. If you know your business will need the equipment for a while, financing with a loan is usually a better investment.

What Will Equipment Financing Cost You?

The appeal of equipment financing is that it doesn’t require you to pay the steep price for equipment upfront. It gives you a way to pay it off in increments. Because of the interest generated by getting a loan, you inevitably end up paying more for the equipment than it actually costs. Part of this is an investment – if you choose to finance the equipment you really need, then you’ll receive more output and money because of it. Part of it, however, is the fee you have to pay for convenience – lenders are making this money more accessible to you, and expect you to pay them for it.

To help break equipment financing down, here’s an example: Let’s say your restaurant needs a new set of dining-room furniture. The expected price of this new furniture is around $12,000 total for all the tables, chairs and booths. After you get approval from a lender, you use that money to purchase the furniture and agree to pay 12% interest back to the lender, along with the money from the loan. Because technology doesn’t improve very quickly when it comes to dining furniture (like it does with computers), the value of the furniture isn’t expected to depreciate significantly over the next few years, so the lender gives you five years to pay the loan off.

$13,440 is the total amount you’ll have to pay back, making your monthly payments $224 for five years. After it’s paid off, you own all the furniture.

Things to Consider

In order to know if equipment financing is the best option for your business, you have to understand your business financials and opportunity costs. If you planned for these costs or have the money on hand,  sometimes it’s worth it so you don’t have to pay the extra money in interest. It’s also an option to wait and save the money, but if you need the equipment immediately, saving isn’t really an option. For many new or small businesses, handing over $12,000 in full isn’t a possibility. It will set them behind significantly, and hinder their ability to start or grow their business.  

This can all sound very overwhelming, but that’s why we’re here. When you sign up with FaasFunds, we analyze your business needs and finances and figure out if equipment financing is the best option for you. We’ll also link you up with an industry expert to help you through tough financial decisions. Navigating the financial world is tough, so make it easier with FaasFunds.

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FaaStrak, LLC and affiliate FaaSfunds are software providers that exist to facilitate funding and help you make financial decisions for your business. The views, reviews, recommendations and suggestions expressed in our articles aren’t in any way affiliated with certain products or companies, and are based on the view of our editorial team alone, not FaaStrak, LLC as a whole. We do not take endorsements from products or companies mentioned above. We give advice based on research and industry knowledge, but the finance world is vast and variable, so we do not claim to be experts at everything within it. We are here to guide and provide direction, but are not here to enforce our knowledge as fact. We cannot be held liable for decisions made by you or your business. Under no circumstances should FaaStrak, LLC or any of its affiliates be liable for any indirect, incidental, consequential, or exemplary damages or loss of profits arising out of or in connection with your access of our site or software.