Entrepreneurship lowers recidivism and boosts income—but returning citizens still face systemic barriers to credit, licensing, and capital
In the United States, the road to entrepreneurship is often paved with resilience—and blocked by bias. For the more than 600,000 individuals who return home from prison each year, business ownership isn’t just a career choice. It’s a strategy for survival.
By 2030, an estimated 100 million Americans will have an arrest or conviction record. With 90% of incarcerated individuals eventually returning to society, nearly 90 million people will face barriers to housing, employment, and credit—barriers that can last a lifetime.
For these returning citizens, entrepreneurship offers an essential path forward. According to our new data at the Association for Enterprise Opportunity, formerly incarcerated individuals are more than twice as likely to become entrepreneurs than their never-incarcerated peers. An estimated 3.5 million U.S. business owners—10.6% of all entrepreneurs—have spent time behind bars. These business owners not only rebuild their own lives—they create jobs for others, employing more than 2 million people nationwide.
“Entrepreneurship is often a lifeline for returning citizens—many times out of necessity,” says Michael Langley, Executive Director of the Florida Justice Institute. “But institutional trust is already low with this population. It’s important that we talk about the power of entrepreneurship as an anti-recidivism tool. Smarter approaches to criminal justice reform are both moral and economic imperatives.”
A Clear Return on Investment
The return on investment for second-chance entrepreneurship is clear. According to AEO, returning citizen entrepreneurs earn 11% more than formerly incarcerated individuals in traditional jobs, and experience 33% lower recidivism rates.
Programs like Defy Ventures and the Prison Entrepreneurship Program (PEP) in Texas demonstrate the potential. Both report recidivism rates under 8%—dramatically lower than the national average of nearly 50%. These results mirror research from Wharton and Kellogg showing that entrepreneurship delivers better financial outcomes and long-term stability for justice-involved individuals.
Yet despite their proven performance, many of these entrepreneurs remain shut out of the financial system.
The Capital Access Gap
Formerly incarcerated individuals face unemployment rates that are five times the national average, driving many to entrepreneurship out of necessity. But systemic barriers persist—especially when it comes to capital.
“Access to capital remains an ongoing issue,” says Andrew Glazier, President and CEO of Defy Ventures. “Lenders need to apply clear, data-informed risk assessments rather than relying on unfounded assumptions built on emotion and outdated perceptions with no basis in fact.”
Traditional credit models fail to account for the challenges of incarceration—such as damaged credit, disrupted income, and limited savings. Some lenders still impose outright restrictions on formerly incarcerated applicants, and until recently, even government programs like the SBA’s loan system imposed blanket disqualifications for those on parole or probation.
Building a More Inclusive System
The landscape is beginning to shift. Congress is considering bipartisan legislation like the NEW START Act and the Prison to Proprietorship Act, which would expand entrepreneurial training and SBA-backed resources. At the same time, the SBA recently finalized a rule eliminating the ban on loan eligibility for people on probation or parole and removing the standard criminal history question from SBA loan applications.
States are advancing reentry reforms as well:
Protecting Credit During Incarceration: California’s Department of Corrections and Rehabilitation offers tools for incarcerated individuals to freeze their credit and mitigate identity theft—efforts aimed at preserving credit scores and financial stability upon release.
Expanding Clean Slate Laws: Since 2023, over a dozen states have adopted automatic record-sealing policies. New York’s Clean Slate Act also prohibits lenders and insurers from discriminating based on sealed convictions, improving access to credit, jobs, and housing.
Occupational Licensing Reform: States like South Dakota and Nebraska recently passed legislation limiting how licensing boards can deny applicants based on criminal history. South Dakota’s 2024 law requires a direct link between the offense and the occupation and offers early determinations for applicants before they begin training.
What We Need Now
To fully unlock the potential of second-chance entrepreneurs, policymakers and industry leaders must rethink how we define risk, reward, and reintegration. That means reforming capital access through fair chance lending programs, while updating underwriting standards to rely on actual data—not outdated perceptions. States should continue to scale Clean Slate laws that prohibit credit discrimination based on sealed records, and licensing barriers that prevent qualified individuals from entering regulated industries must be removed. At the same time, reentry support must go beyond job placement to include mentorship, credit restoration, and technical assistance as core components of any inclusive economic development strategy.
Taken together, these shifts can transform not only individual lives, but the broader economy—proving that entrepreneurship is one of our most powerful tools for public safety, workforce expansion, and wealth creation.
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