Best Financing Options for Immigrant Business Owners

In this article, we’ll discuss:

How an immigrant can start a business in the U.S.
The benefits of business loans for immigrants
Small business financing options for immigrants
Other funding options for immigrant businesses
Small business grants for immigrants
The best funding option for immigrant businesses

Many immigrants to the United States dream of opening their own businesses and creating a better life for their families. Since the founding of this nation, it’s been a tried and true path to success for millions of people. In fact, according to a 2016 study by the National Foundation for American Policy, 51% of all U.S. startups worth $1 billion or more were founded by immigrants. Moreover, immigrants represented 29.5% of all new business owners in 2016. Those are staggering statistics that reflect just how much immigrants contribute to the American economy

But that doesn’t mean that it’s easy. Uprooting your family and moving to a new culture is always challenging, but adding the difficulties of starting a business can make feel overwhelming.

The good news is that many immigrants can get business funding with the proper guidance. If you’re an immigrant who wants to join the growing number of foreign-born entrepreneurs in the U.S., read on to learn the best financing options for immigrant business owners.

Here are some things you should know about starting your own business in the U.S.

How does an immigrant start a business in the U.S?

Running a business is one thing. Maybe you owned and operated your own business in your native country. But meeting regulatory and legal requirements in the U.S. is a different ballgame. It’s essential to run your business legally from every viewpoint to have lasting success in the U.S. Here’s how you begin the process.

Obtain a green card or get a visa. If you plan to be a permanent U.S. resident, you’ll want to apply for an EB-5 visa. The U.S. Citizenship and Immigration Services website discusses everything you need to know about applying for green cards and visas.
Choose a structure for your business. You’ll first need to determine what kind of business you want to open. The two main types of business structures for immigrants are an LLC and a C-corporation. There are benefits and disadvantages for each, and it’s best to discuss them with a CPA.
Choose a business name, then register it with the state. Once you determine which state you’ll operate your business in, you’ll need to register your company. Some states, such as New York, Delaware, South Dakota, Nevada, and Wyoming, have more immigrant-friendly business policies. But that shouldn’t be the deciding factor in where you locate your business. The local market surrounding your industry and type of business should be a key consideration.
Get your ITIN. Every company in the U.S. has to have a taxpayer number. For natural-born U.S. citizens, this is typically a social security number. But for immigrants, it is an individual taxpayer identification number (ITIN).
Get an EIN. An employer identification number will be necessary to file tax returns, open a business bank account, and apply for business licenses. Opening a business bank account is needed to help prepare financial statements for tax purposes and apply for business loans. It’s also an ongoing part of your business plan.
Register your company as a legal entity. This is accomplished by filing articles of incorporation with the state where you operate your business. Every state will have different rules about this, and an accountant can likely help guide you through the process. The Secretary of State’s website where you live may also have information on how to register.
Find funding for your business. Once you meet the legal requirements for opening a business, you can seek business financing through loans or other channels.

What are the benefits of business loans for immigrants?

The biggest benefit of a business loan is that it can get you the funding needed to invest in your business. With the funds from your loan, you can buy supplies or equipment, secure a brick-and-mortar or real estate location, or have enough cash on hand for a few months of working capital while you grow your customer base and become profitable.

A business loan will also help you build the business credit needed for a long and successful enterprise. As you continue to operate your business, you’ll want to seize opportunities that come along in your business journey to keep your company growing.

Can an immigrant get a special business loan?

As an immigrant, you have access to many of the same business loans that your American-born counterparts are. However, many immigrant business owners have the added challenge of language obstacles, cultural differences, and the challenge of showing good credit history if your financial records are difficult to access due to your country of origin.

These barriers sometimes make business loans less accessible for immigrants—even immigrants who are now U.S. citizens. Thankfully, there are many resources and organizations that help immigrant entrepreneurs overcome these challenges and find business financing. The other good news is that now more than ever, many lenders are working harder than ever to meet the needs of immigrants.

What financing options do immigrant business owners have?

There are many potential opportunities to fund your small business. Here’s a closer look at some of them.

Term loans for immigrant business owners

A term loan is a popular business loan that advances a borrower a set amount of money, and the borrower pays back the loan each month with interest over a predetermined length of time.

Term loans are available through conventional banks and online lenders. However, term loans through traditional financial institutions are more difficult to get and even harder for immigrants. You also must apply for bank loans in person, which compounds the challenges.

The application process with traditional lenders is complex. In the end, you may wait for a long time, and the bank might still decline your loan.

Many immigrant entrepreneurs apply for their business loans online through a funding specialist or marketplace for these reasons. Biz2Credit, for example, specializes in providing financing for immigrant business loans.

It helps to have a good credit history to increase your chances for approval with a term loan. It will also help you get a lower interest rate on your financing, thereby lowering the cost of your loan. But even when your credit isn’t optimal, an immigrant-focused loan provider like Biz2Credit can sometimes get you funded.

Working capital loans and microloans for immigrant entrepreneurs

Working capital loans and microloans are shorter-term loans that are available for immigrant business owners. Each has a shorter repayment period, usually less than 18 months of payback time.

The credit requirements for short-term loans aren’t typically as strict as they are with regular term loans. Immigrants usually haven’t had as much time in the U.S. to form a solid credit history. Therefore, these short-term loans are very popular with immigrant entrepreneurs who haven’t been in business long or are having difficulty getting other types of small business loans.

Interest rates are typically a little higher with microloans and working capital loans, but if your business is successful, you have the option of paying your loan off early. In the meantime, funding can grow your business and help you have success faster.

Immigrant business credit cards

Many entrepreneurs use business credit cards to help with operating costs and cash flow. A credit card will help you increase your credit score and build valuable credit for better business loans down the road.

When choosing a business card, opt for one that has a 0% or lower interest rate with an introductory period. This allows you a longer grace period to pay off your card before accruing any interest.

SBA loans for immigrant business owners

The U.S. Small Business Administration (SBA) is a government agency created to help small business owners in the U.S. by providing assistance, resources, and loan guarantees to lenders.

The SBA is also one of the largest supporters of immigrant entrepreneurship and has been proactive about helping minority business owners, including immigrants, qualify for business financing.

But, be forewarned. The SBA is thorough in its processes for U.S. citizens and immigrant entrepreneurs and qualifying for an SBA loan is challenging. The SBA is rigorous when it comes to reviewing your immigrant documentation in addition to the financial documents that are typically required when applying for an SBA loan.

You’ll stand a better chance of getting an SBA loan when you have a green card or have obtained a legal permanent resident status. If you have a work visa, it’s also possible you might meet eligibility requirements for SBA financing. The SBA list other conditions on their website where a non-U.S. citizen can qualify for an SBA loan.

What are some other financing options for immigrant small business owners?

Other funding options available for immigrant entrepreneurs include real estate financing, equipment financing, merchant cash advances, invoice factoring, and more. But if none of these fit the bill, a business grant might be the answer you’re looking for.

Small business grants for immigrants

Small business grants are typically offered through nonprofits and state government agencies. The great thing about immigrant business grants is that you don’t have to pay them back if you get one.

The downside is that grant organizations typically have an allotted amount of money set aside for financial assistance to immigrants. This means that it’s highly competitive to qualify for and secure a grant.

The first place you can look into a grant is through state grant programs where you live. Many states have business development grant programs for foreign nationals. There are also government programs at the national level.

Some agencies only offer grants for certain types of businesses, and you may have difficulties finding something that fits your business needs.

Like small business loans, the application process is exhaustive. But, when you consider that a grant can potentially mean free funding for your business, it’s worth trying for.

You’ll want to have a solid business plan and proposal when applying for a grant. Research every possibility, find the best fit for your business, and then go for it! If you’re successful, the benefits will be tremendous. Here’s a closer look at some available grants.

Microenterprise Development Program

The Microenterprise Development Program (MDP) is designed to assist immigrants who want to start a new business or expand their existing business. The MDP distributes grants to immigrants and offers revolving lines of credit and microloans up to $15,000.

In addition, the program offers important training to immigrants in business development, management, bookkeeping, and marketing—all skills that are essential in operating a successful small business.

Rural Business Development Grant

Immigrants who live in remote areas of the U.S. potentially qualify for a rural business development grant. This grant provides eligible businesses with working capital grants, real estate, training, and more.

To qualify, your small business can’t employ more than 50 workers or earn more than $1 million in annual revenue. The grant program is offered by the U.S. Department of Agriculture and Rural Development.

Wilson-Fish Alternative Program

This program offers various types of assistance to refugees and immigrants, ranging from training in the English language to medical aid and business licensing.

The WF Program favors immigrants who can demonstrate previous entrepreneurial experience. In addition, the program awards cash under different circumstances. While the program isn’t a grant per se, its services can be indispensable for an entrepreneurially-minded immigrant.

Community Development Financial Institutions (CDFIs)

CDFIs are private financial organizations that help to mediate and facilitate funding for disadvantaged and immigrant communities. CDFI providers include community development credit unions and banks, and corporation-based investors and lenders, among others. Head on over to CDIF.org to learn more.

Bottom line: The best funding options for immigrants

Getting financing is a challenging task for every business owner, but even more so for immigrants. Still, there are funding options available for you, from online financing providers to small business grants and more.

Consider choosing a funding specialist like Biz2Credit that understands the challenges immigrants face and is willing to go the extra mile to get your business financed.