Research says, in the U.S., immigrants are 80% more likely to get into entrepreneurship than the natives (as per a new study co-authored by an MIT researcher in American Economic Review: Insights.). Immensely contributing to America’s economic success, immigrants, in the U.S., start businesses of all sizes and considerably expand labor demand. The Fortune 500 list, which is an annual list of the 500 largest United States corporations compiled and published by Fortune magazine, shows that 43.8% of companies were founded by immigrants or their children. However, immigrants often require to cross multiple hurdles at the initial phase of their entrepreneurial journeys. Though starting a new business is sometimes distressing for immigrants, understanding certain rules and regulations, to uninterruptedly operate in the U.S., always makes the entire process simpler.

Also, an immigrant looking to start a business in the U.S. must acquire ample knowledge about the various business finance options available for Non-U.S. citizens and the factors that determine the creditworthiness of the applicants, as every business relies primarily on money. To thrive in today’s highly-competitive business environment, an entrepreneur needs to make sure he/she has enough funds to carry out regular operations, pay for a crisis and use it for expansion, to ensure steady growth. But, financial crunch is what every business come across at some point in their journeys. Hence, all aspiring entrepreneurs or those who have already started their venture must get a clear idea about the business loan criteria and requirements in the U.S. to be able to easily acquire finance, when required. In the case of immigrant entrepreneurs, their citizenship status often narrows down the loan options and impacts the amount as some lenders consider non-citizen applicants a higher risk and hence reject their applications. However, immigrant business loan applicants, who are yet to get citizenship, can get their loan application signed by a U.S. citizen to widen their finance options.

Business Loan Requirements For The Immigrants:

  • Immigrant entrepreneurs looking for business finances must build their credit in the U.S., as most lending institutions require specifically a U.S. credit history. A U.S. credit card often helps to build a history. House rents, utility bills and regular credit card payments immensely help to build positive credit scores. 
  • The applicant’s time in business, assets, ongoing debt load, cash flow and profit-loss statements usually decide his/her creditworthiness. The other required documents are Social Security Number (SSN), Individual Tax Identification Number (ITIN) and Immigrant visa. A non-citizen who is on a working visa often gets a temporary SSN. Though not all lenders ask for permanent SSNs, which only citizens get, some do. Those who are not eligible for permanent SSN but have a U.S. taxpayer ID number can submit a W-7 form to obtain the 9-digit ITIN, which is accepted by many lenders. Besides, an immigrant applicant must have a work visa or an immigrant visa to be able to apply for a business loan.

6 Popular Financing Options for Immigrant Entrepreneurs in the U.S.

Small Business Administration (SBA) Loans

SBA loans are provided to immigrant business owners who have a legitimate work visa, operate a profitable business in the U.S. and have invested equity into their businesses. These loans can be used to start or expand a business, cope with emergencies, buy assets, carry out regular operations and export goods. 

Microenterprise Development Program for Refugees

This program is initiated by the Office of Refugee Resettlement and is a considerable option for immigrants looking for small business loans. Up to $15,000 along with training is provided to the applicants to help them start, operate or expand their businesses. 

Minority-Specific Lending

Immigrants belonging to certain ethnic or social minority groups can reach out to the Minority Business Development Agency, which is a department of the U.S. Department of Commerce. Though this agency does not directly provide loans, it helps business owners to find unique avenues to capital through federal grant funding. Documents like background information, a business plan, tax returns and bank statements are mandatory for the application. 

Term Loans

Business term loans, often used for long-term investments like debt refinancing and commercial real estate, provide a one-time capital infusion that needs to be repaid over the pre-decided term. In the case of secured term loans, the applicants need to put up their business assets as collateral, and when it comes to an unsecured loan, collateral is not required, but a personal guarantee is sometimes needed. Also, the interest rates are higher in the case of unsecured term loans. 

Merchant Cash Advances(MCAs)

MCAs are one of the most popular alternative financing options. MCA lenders offer advances in exchange for a certain percentage of the borrower’s future daily credit card sales. The lender keeps on withdrawing the percentage from the borrower’s business account till the entire amount is recovered. As the repayment of the fund takes place through a percentage of sales, the amount recovery often gets slow when revenues go lower than expected. MCAs are one of the best financing options for immigrant business owners who do not have high credit scores to be able to acquire a traditional bank loan, as MCA lenders are more interested in the profitability and income of the applicants’ businesses than their credit scores. The repayment period often ranges from 3 to 18 months.

Business Line Of Credits (LOCs)

Like business credit cards, business LOCs give the borrowers access to funds that can be accessed as per the borrowers’ requirements. These come with revolving credit lines and interests are applied to the withdrawn amount and not the entire approved amount.