The Importance of Credit, Capital, and Capacity Building for Returning Citizen Entrepreneurs

Among the barriers faced by returning citizens looking to start a business, two of the biggest relate to credit and capital. Receiving a business loan with bad or no credit is challenging, yet that’s the situation many returning citizens experience. Their credit might have been damaged by the inability to make payments on revolving credit accounts while in prison, or they may have no credit history at all from that time. Justice involvement also puts individuals at increased risk of identity theft and its potentially ruinous impact on one’s credit.

Even with good credit, returning citizens often struggle to find organizations willing to lend to them to help get their business started. This lack of access to capital can be extremely limiting; with an unemployment rate of 27% (more than 5 times higher than that of the general US population), many returning citizens lack the personal savings or steady monthly income to cover startup costs on their own. Existing business owners have also been excluded from government lending programs because of their past justice involvement, as was the case with the initial Paycheck Protection Program rules last year.

At RMMFI, justice involvement has no bearing on our lending decisions, and our loans can help returning citizen entrepreneurs build a strong credit history. RMMFI is a longtime member of the Credit Builders Alliance, and, with the support of JPMorgan Chase & Co, we participated in CBA’s inaugural Achieving Credit Strength for Returning Citizens program in 2020. Working as a cohort with the three other participating organizations (The First 72+, MaineStream Finance, and UCEDC), we shared, tested, and implemented best practices around credit building strategies for returning citizens. We are continuing to develop our work with CBA and other community partners this year.

A 2020 report by the Association for Enterprise Opportunity calls on entrepreneurial training programs that serve returning citizens to include credit-building systems and access to right-fit capital. RMMFI offers both, but we also recognize that credit and capital alone are not enough. Our comprehensive programs help ensure that capital meets capacity so that returning citizen entrepreneurs are equipped with the tools, knowledge, and support to navigate both the challenges and opportunities that come with business ownership.