Being an Immigrant is not an easy thing. It is not easy to sustain your business in a difficult and unfamiliar ecosystem. Besides the cultural and linguistic barriers, which Immigrants often face, there are also challenges of setting up a business in this new ecosystem. Although an Immigrant Businessman would have anticipated these challenges, there is a constant need to make it simpler not just for businessmen but also for the saturated Small Business loan market.
There are many issues for the banks/financial institutes as well as with the Businesses itself (Non-conventional Business models influenced by the native geographies). Let’s check out few problems faced by the Businesses owned by the Immigrants and later we will discuss the ways to solve it.
The problem Immigrant businesses face receiving capital for their businesses
No Social Security Number (SSN)
Many Immigrants are not permanent residents, even though they might be living there for decades. With no SSN number, A bank/lender can’t retrieve all the necessary information required to process the loan with a person’s SSN. Even if you don’t have an SSN you have the option of opening a bank account or apply for a loan. All you need is an ITIN (Individual Tax Identification Number).
No credit history Information
The credit history, the credit score determines the worthiness of the loan seeker. It indicates the score based in the repayment history of the borrower. This is very important as a Credit score just doesn’t decide the qualification but also serves to give the lender a better deal on loans. Thus it becomes difficult for companies to grant immigrants the loan without a credit report.
Uncertainty in retrieving the money (for lenders)
The biggest fear for banks or any lending company is the inability to recover money. Incase of Immigrant businessmen, as he may not be a citizen of that country and may even run away if he/she is unable to repay back the loan. This triggers the biggest fear for banks and finance companies. Absence of co-signer, as banks require a cosigner to co-opt the loan with the borrower, without SSN, this goes out of option.
Non-compliance with the local administration
Often an Immigrants find themselves in a situation where they couldn’t comply with the state regulations for starting a business. ITIN can be obtained without SSN but still, it’s not a smooth road.
Cultural and linguistic barrier
This has to do more with the heart than the brain. The ability to convince your idea to the banker or the lender has to do with your fluency with the language and explaining your idea combined. In order to raise confidence in the mind of a banker or financier, it is essential to align with the working culture which the bank or lending company believes in. Although this does not come naturally, an Immigrant needs to work on this aspect to get qualified.
Unfortunately, due to cultural bias and the practical realities of building credit, obtaining funding as an immigrant can be difficult.
General Requirements to apply for any Business loans to Immigrant Businessmen
- A Social Security Number or SSN (Not required in all cases)
- An Individual Taxpayer Identification Number or ITIN (Must have if you don’t have SSN)
- Visas: J-1, TN, E, H1-B, and type O visa.
Types of loans granted to Immigrant Businessmen with the required documents in USA.
SBA loans
Among the most affordable forms of loans, Small Business Administration loans. They have Interest rates competitive for other much interest on the loan amount.
For Immigrant Businessmen, they should establish their Lawful permanent residential ship or LPR to obtain SBA loans. Since it takes around a year’s time to issue LPR, new immigrants are issued an immigrant visa with a Customs and Border Protection (CBP) stamp evidencing their lawful permanent residence (LPR). CBP visa with CBP stamp serves as evidence of LPR status, so long as the visa has not expired.
The only problem with these loans that they require extensive compliance and thus a lot of paperwork.
Immigrant has the option of choosing SBA loans, which is lent by private firms, charging fixed interest.
Major requirement for Immigrant Businessman for SBA loans
The major requirement here is that non-citizen borrowers must be within the country lawfully with what the SBA calls “an appropriate work visa” with a current date.
Short-term loans (Microfinance)
These loans, as the name itself is self-explanatory are to be repaid in the shorter term. The time to repay a short-term loan usually less than 18 months, and in some cases less than a year. The loan amount is small and thus it doesn’t require much paperwork.
Major requirement for Immigrant Businessman for Microfunding/Microfinance:
- When no social security any other type of ID
- No legal residence status required
Get to know One of the best Micro-financing options
Working Capital loans
These lenders focus on businesses with a high demand for equipment and tools etc. Workshops, restaurant businesses, Small manufacturing companies, salons, etc are good examples of businesses requiring working capital.
To apply for a Working Capital loan the business has to submit a quotation including the price of the piece of equipment or services he/she intends to buy, the credit history(if he/she has) and other business documents which include proprietary documents, tax filing, etc.
Major requirements for Immigrant Businessman for Working Capital loans:
- Proof of company registration
- Licenses and permits
- Last year tax returns (in loans over $50,000)
- EIN or, in default, ITIN
Best Working Capital loans with a minimum rate of interest
Merchant Cash Advance(MCA)
Although very similar to Revenue-based Financing in this type of financing, a company grants you access to cash. In return, you will have to pay a percentage of your future sales made with credit and debit cards, plus a fee.
Major requirements for Immigrant Businessman for Merchant Cash Advance
You can apply online using the following documents
- A copy of your Driving license
- Copy of bank statements
- Tax filing
- Credit score statement (optional)
As the loan amount is in cash, there is a limit to the amount you receive plus the MCA is the financial product with the highest cost (read more)
Government grants
Office of Refugee Resettlement to offer financial assistance to Immigrant Small Business owners under the Wilson-Fish program and the Microenterprise Development Program.
Immigrant business owners can find grants at Grants.gov by checking the website regularly for requirements to grants that fit their needs. Most information won’t be Immigrant specific unless you’re specifically looking for assistance as a refugee or asylee
Community Loans & Loans from Friends and Family
Borrowing money from the community or diaspora of friends and family is probably the best for lending, as this reduces the loan processing charges, interest rates (in most cases) and the repayment can be flexible.
Small Business owners from Immigrant community these days rely on the community lending
Business Credit Cards
Probably, the most flexible credit option is a Business Credit Card. Companies such as Deserve and CreditStacks allows you to order Business Credit cards without the SSN number. Business Credit cards come in all sizes depending on your business credit requirement.
Major requirements for Immigrant Businessman to apply for Business Credit Cards
- Proof of Identity.
- A social security number or an Individual taxpayer identification number (ITIN).
- You can also apply for an American Express card using your International credit history from selected countries
Crowdfunding
There are several methods of getting funded by the crowd or like-minded community which believes in donating money in small increments to a project which has moral and ethical value and that is good for the community
The donation method of crowdfunding this model has been around for years, asking for donations on Facebook causes or GoFundMe is the best example of this. Second is the pre-order method of crowdfunding here people make online pledges during a campaign to pre-buy the product for later delivery a good example of this is Kickstarter.
Major requirements for Immigrant Businessman for Crowdfunding
Everyone qualifies, including immigrant businessmen for this type of funding as it is based on morals, ethics and lesser on formalities and paperwork. The only problem with this type of funding is the project should have a moral appeal ( like with the objective of contributing to the community or philanthropy etc or the project has to be exceptionally unique, as in a new invention or devices which solves problems never addressed before.
Personal loans
You can also use a personal loan to finance your business. As we have explained before, personal loans are a quick and easy alternative to obtain funds that you can invest in your company, although you should consider whether the amount of capital (which is usually quite less than in other types of financing) is enough to cover your needs.
Major requirements for Immigrant Businessman for Personal Loans
- At least 18 years old
- Holder of a verifiable bank account
Best Plans for a personal loan with minimum interest is here
Personal Loans: Are You a PowerSeller? Get Funding to Grow Your Business. Easy & Fast!
Business Credit line
A credit line is a pre-approved loan to the businessman which he/she can take out from a pool as and when needed. Once you as the borrower have been approved for a business line of credit, you can then draw funds from this pool as needed, up to your established credit limit.
Advantages of Credit line
- Pay interest of the amount withdrawn
- The pre-approved amount, always ready for withdrawal
- Eliminates the fear of falling short of amount, as in most cases the approval is taken for a bigger number.
- Can be used as Emergency funds, for the things not taken into account while planing
Best plans for Line of credit with a minimum interest rate is here
Revenue-based Financing (RBF)
Revenue-based financing(RBF) is something that is gaining popularity among small businesses due to its nature of getting funded without losing the ownership. It’s a loan, but not the one who guesses her bank is RBFs unique because it provides entrepreneurs with growth capital in return for the financier being paid a small percentage of future revenues. It’s technically alone but there are no fixed payments no set periods for repayment and no set interest.
Example: A $250,000 loan might work the loan principal. The investor provides 250,000 to small company payments. Every month the company pays the investor a fixed percentage of revenue.
Let’s say 5%, (the percentage is fixed when the loan is funded) and typically falls between one and ten percent.
If the revenues in January are $100,000 then the company pays the investor $5,000.
In February’s revenues are $80,000 that month’s payment is $4,000.
Loan termination the loan is fully repaid when the cumulative monthly payments equal a fixed total dollar amount called the repayment cap.
- Easy 24 hours approval
- No losing equity, maintaining ownership
- Min 3 months in business can apply
- Min Revenue requirement: $7000 per month
References
US Govt EB5 visa formalities: https://www.uscis.gov/eb-5
EB5 Visa: https://en.wikipedia.org/wiki/EB-5_visa
US immigrant grants: https://www.uscis.gov/citizenship/organizations/grant-program