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Accepting Cryptocurrency for Your Business

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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If you think of yourself as an early adopter of emerging trends, you may be wondering how to accept cryptocurrency as payment for the goods and services your business sells. Accepting cryptocurrency could open an additional revenue stream for your small business and help you reach new customers, said Dennis Murphy, Ohio-based certified public accountant and principal at financial advisor firm Skoda Minotti. And some processing services are making it easy for business owners to take Bitcoins and other digital currencies as payment.

However, cryptocurrency is highly volatile, and may not be ideal for risk-averse business owners. Continue reading to determine if accepting cryptocurrency could be beneficial for your business and how to receive this type of payment.

What is cryptocurrency?

Cryptocurrency is a digital exchange currency that uses cryptography to transfer value from one person to another online. It relies on what’s known as the blockchain, a public digital ledger that records all transactions anonymously in chronological order. Using a personalized digital key, anyone can add transactions to the blockchain. This technology secures the exchange of cryptocurrency.

There are thousands of types of digital currencies traded on a daily basis. Bitcoin and Ethereum are among the most popular cryptocurrency, as they have the highest value. Also among the top cryptocurrencies are XRP, Bitcoin Cash and Litecoin.

A small portion of businesses accept cryptocurrency, hovering around 1% to 3%, said Matthew May, co-founder of Atlanta-based financial firm Acuity, and most of these companies accept Bitcoin.

How it works

The value of cryptocurrency is derived from supply and demand. For instance, the more people who want to buy Bitcoin compared to how much is available determines its value. The value of cryptocurrency fluctuates to reflect both factors. Cryptocurrency can be converted into fiat currency, like U.S. dollars, or another type of cryptocurrency.

Only some cryptocurrencies, including Bitcoin, can be directly exchanged for USD. Others must be converted into those types of cryptocurrency before being converted into cash, May said.

Digital wallets hold cryptocurrency and record the value of coins. Wallets also verify transactions and the number of coins in storage. Cryptocurrency storage can be considered “hot” or “cold,” Murphy said. A wallet that is connected to the internet would be hot, while a storage device such as a USB drive would be considered cold.

To trade or make purchases with cryptocurrency, you’d need to keep it in a hot wallet. It’s best to move coins onto cold storage devices if you don’t plan to trade frequently to keep it safe, as online cryptocurrency storage is vulnerable to hackers, Murphy said.

Accepting Bitcoin as payment

Anyone with a cryptocurrency wallet could individually transfer Bitcoin to another person. To accept a payment, you would need to display a QR code that connects to your wallet, which the other person would scan to transfer Bitcoins to your account. You wouldn’t owe a fee for accepting cryptocurrency payments, though some wallets charge a fee for spending.

You could also accept cryptocurrency in a way that is similar to accepting credit cards and allows you to convert your coins into cash. You’d need to sign up for a payment processing system that would simplify the process of receiving cryptocurrency, May said.

BitPay

A common option for businesses is BitPay, a payment processor designed specifically for Bitcoin transactions. Businesses can accept Bitcoin payments online, via email or in person using the BitPay app, which we’ll describe in more detail, below.

Businesses that frequently make international transactions could benefit most from a service like BitPay, May said. Exchanging cryptocurrency could be a less expensive option for selling goods and services across borders, as the exchange rates for fiat currencies wouldn’t apply.

“It might be easier for somebody to get Bitcoin than the U.S. dollar,” May said. “It might be cheaper for them.”

To sign up for a BitPay merchant account, you would need to submit an application with your business name, address, industry and website, as well as a few personal details like your name and date of birth. BitPay charges a 1% fee on each transaction and allows unlimited monthly transactions. You can choose to receive payments in Bitcoin or a fiat currency of your choice, including USD, and BitPay would make the exchange for you.

Payments made through BitPay wouldn’t be subject to price volatility, and you would receive the exact amount that you charge minus BitPay’s 1% fee, regardless of the change in value of Bitcoin. For online transactions, BitPay provides payment buttons, embeddable invoices and check out services for your website.

How to use the BitPay app

If you want to accept Bitcoin payments in person, you could use the BitPay Checkout app for Android and iOS devices. When using the app, you would enter the amount owed and BitPay would generate an invoice for your customer. A QR code would appear on your device, and the customer would scan the code to access and pay the invoice from their device. Customers would pay directly from their own Bitcoin wallets.

Several cryptocurrency apps provide the same service and could integrate with your current POS system. Coinbase, Coinkite, MyEtherWallet and Sia wallets provide apps that facilitate transactions for different types of cryptocurrency. Customers could scan a QR code, manually input a code or otherwise connect with your device to pay you in cryptocurrency.

Converting cryptocurrency into cash through a service like BitPay as soon as you receive a payment would be a smart strategy if you don’t have much experience with digital currency, Murphy said. You wouldn’t have to worry about a change in value that could occur if you hold onto coins.

“That’s the best thing to do if they want the easiest compliance, easiest reporting and easiest accounting,” Murphy said.

We’ll dive into compliance and reporting in the next section.

The advantages and disadvantages of accepting cryptocurrency

ProsCons
  • Anyone can make or accept a cryptocurrency payment.

  • Lack of regulation may leave users with little recourse in case of theft.

  • You could hold onto coins as an investment.

  • You may need to pay taxes and report any gains or losses you incur. Cryptocurrency could lose value if you wait to convert to cash.

  • BitPay and other services could immediately convert cryptocurrency payments to cash.

  • Services like BitPay charge a fee to accept payments and convert currency.

Legal and tax implications

Because cryptocurrency is decentralized and transactions are considered peer to peer, Bitcoin and other coins aren’t subject to the same treatment as money in a bank, Murphy said. But you still must meet IRS requirements if you accept cryptocurrency in a business transaction.

The IRS treats cryptocurrency as property, similar to a stock, bond or other trading security that can be sold for a profit, Murphy said. Each time you sell or recieve cryptocurrency, you must report any gains or losses you generate from a cryptocurrency transaction, he said.

If you keep cryptocurrency for too long after a business transaction, you may need to report a personal gain or loss from that payment. For instance, if a customer paid you $10 in cryptocurrency for a notebook, but the currency appreciates to $15 before you convert it to dollars, you would then need to report a capital gain because the original sale was recorded as $10, Murphy said. If you converted the $10 into cash right away, you wouldn’t need to worry about recording an additional gain or loss based on market fluctuation.

“It’s best if business owners convert it into USD and don’t ever see the cryptocurrency,” Murphy said.

However, it is legal to keep a cryptocurrency payment in coin form as an investment, Murphy said. You could even convert a portion to cash and keep the rest as coin. You would just need to make sure you accurately report how much you earn or lose from that investment.

Third parties that handle digital currency transactions on behalf of businesses must issue a 1099-K form to merchants summarizing all payments. BitPay, for instance, would report the USD equivalent of your transactions to the IRS and send you a 1099-K with the same information.

You would only receive a 1099-K form detailing your transaction history if you’ve received more than $20,000 and made more than 200 transactions throughout the year. The purpose of a 1099-K is to help you make sure you accurately report your business income when filing income taxes. It would be your responsibility to report any gains or losses from cryptocurrency when you file your income taxes, Murphy said.

“It’s all voluntary,” he said. “It’s all self-reporting up to this point.”

If you fail to properly report income received through cryptocurrency transactions, you could face an audit or more extreme penalties. You could be subject to criminal charges such as tax evasion or filing a false tax return, which could result in three-to-five years of prison time and a fine up to $250,000.

The federal government in the U.S. does not recognize cryptocurrency as legal tender, but cryptocurrency exchange is regulated at the state level, although at varying degrees. While some states have not issued any guidance regarding digital currency, others require businesses to obtain special licenses to handle Bitcoin and other cryptocurrency. Check your local laws or consult an attorney to ensure you remain compliant when accepting digital currency.

Is cryptocurrency right for your business?

The main factor to consider before accepting Bitcoin or other digital coins is whether your customers or clients want to make payments with cryptocurrency, May said.

“If you’re an early adopter, you’re probably already in,” May said. “If customers aren’t asking for it, I wouldn’t worry about it right now.”

If you do have customers ready to pay with digital currency, it wouldn’t hurt to set up an account with a service like BitPay, Murphy said. You may find it’s more affordable than accepting credit cards. BitPay charges a 1% fee, while major networks like MasterCard, Visa, Discover and American Express charge average credit card processing fees of 2% or more.

“For those businesses looking for ways to reduce payment processing fees, it’s good for that,” Murphy said. “Just make sure it’s done securely.”

Payment processors like BitPay reduce risk for business owners accepting Bitcoin, as it can immediately convert payments to cash. If you don’t hold onto coins for personal investment, you wouldn’t need to worry about a change in the value of the currency or reporting capital gains or losses when filing taxes.

Cryptocurrency is far from becoming a replacement for standard currency, May said, so business owners shouldn’t feel pressured to accept Bitcoin or other coins as payment. But digital currency could become mainstream in the near future, he said. It may be worthwhile to learn more about how cryptocurrency could potentially benefit your business.

“Think about how little cash you carry around versus ten years ago,” May said. “I think it’s coming – it’s just a matter of when.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
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Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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How You Could Win an SBA Small Business Week Award

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Each year in May, the U.S. Small Business Administration hosts National Small Business Week, and the federal agency honors outstanding small business owners across the country as part of the event. Past winners of SBA Small Business Week Awards include the owners of Ben and Jerry’s, Chobani, Callaway Golf, Dogfish Head and Tom’s of Maine.

Mubarakah Ibrahim was named the 2019 Connecticut Home-Based Business of the Year. Ibrahim is the owner of Mmm Pies and Gourmet Dessert in New Haven, Connecticut where she sells homemade bean pies to local retailers, including a nearby Whole Foods. A bean pie is a traditional African-American dessert made from mashed navy beans, with a texture similar to sweet potato pie, Ibrahim said.

While the contest doesn’t come with a cash prize, it does mean major bragging rights for businesses that win in their state or at the national level. Continue reading to craft your winning nomination for your own SBA Small Business Week Award.

Ibrahim, a longtime health fitness trainer, started the business in 2016 shortly after making her first bean pie. One afternoon, Ibrahim had a craving for the treat she used to enjoy as a child in Brooklyn, New York, but realized there were no businesses in New Haven that sold bean pies. Ibrahim tweaked recipes she found online until satisfying her craving, sharing her bean pie journey with her social media followers.

“I found there was a demand for it,” she said.

Ibrahim now bakes pies in a rented commercial kitchen, but the business is officially based at her home address. She was nominated for the award by the Women’s Business Development Council in Connecticut; “it made me feel my efforts are paying off,” she said about her win.

What is National Small Business Week?

The SBA has recognized the efforts of entrepreneurs and small business owners for more than 50 years.

During National Small Business Week, the SBA hosts a free two-day virtual conference consisting of online workshops and networking. Business owners can participate in all webinars or choose topics that are of interest.

“National Small Business Week is not only an opportunity for us to recognize small business owners and those who champion the cause, but it’s also a learning opportunity,” SBA Georgia District Director Terri Denison said.

The SBA also hosts a hackathon in partnership with Visa. The event encourages entrepreneurs to spend a weekend brainstorming to solve business challenges. The theme of 2019’s hackathon was disaster relief.

To add a social media component, the SBA facilitates a Twitter chat about starting and growing small businesses. Anyone can join the conversation using the hashtag #SmallBusinessWeek.

National awards are given out at a ceremony in Washington, D.C., while SBA District Offices in each state host their own events to recognize local winners.

Next, we’ll discuss the various awards available to small business owners.

How to win an SBA Small Business Week Award

A number of national honors are awarded to business owners and supporters each year. These include:

  • Small Business Person of the Year
  • Small Business Exporter of the Year
  • Phoenix Award for Small Business Disaster Recovery
  • Phoenix Award for Outstanding Contributions to Disaster Recovery – Public Official
  • Phoenix Award for Outstanding Contributions to Disaster Recovery – Volunteer
  • Federal Procurement Award – Small Business Prime Contractor of the Year Award
  • Federal Procurement Award – Small Business Subcontractor of the Year Award
  • Federal Procurement Award – Dwight D. Eisenhower Award for Excellence
  • 8(a) Business Development Program Graduate of the Year Award
  • Small Business Development Center Excellence and Innovation Award
  • Veterans Business Outreach Center Excellence in Service Award
  • Women’s Business Center of the Year Excellence Award
  • Jody C. Raskind Lender of the Year
  • Small Business Investment Company of the Year

Each award has its own nomination form and requirements. For example, the 8(a) Business Development Program award is given to a business that has participated in the program designed for disadvantaged businesses. You can find the downloadable forms here.

The awards vary slightly at the state level, and some states may have more or fewer categories than others. In Connecticut, where Ibrahim won Home-Based Business of the Year, the available awards are:

  • Small Business Person of the Year
  • Minority-Owned Business of the Year
  • Women-Owned Business of the Year
  • Exporter of the Year
  • Jeffrey Butland Family Owned Business
  • Manufacturer of the Year
  • Veteran Owned Business
  • Microenterprise
  • Home Based Business
  • Women’s Business Center of the Year

In Georgia, the awards are similar, with the addition of awards like Rural-Owned Small Business of the Year, Young Entrepreneur of the Year and Second-Chance Hiring Champion. There are even some given to small business supporters, like Small Business Media Advocate and Women in Business Champion.

“That’s to recognize individuals who may or may not be business owners who support and advocate on behalf of small businesses,” Denison said.

Nominations typically open during late summer or fall, Denison said, although nomination forms for the 2020 awards are not yet available. Eligibility is not limited to businesses that have received financing or other support from the SBA — any business owner could be nominated.

Winners are selected based on the nomination packet that’s submitted, Denison said. In Georgia, a three-person committee reviews each nomination and chooses who best meets the criteria for each award, she said. Small business owners may nominate themselves, but most are nominated by others. A consulting firm, chamber of commerce member, lender or Small Business Development Center that the business owner has worked with are typical nominators, she said.

The Women’s Business Development Council in Connecticut was familiar with Ibrahim’s business because she previously attended WBDC workshops and sought help managing her operation.

“I needed help with the financials more than anything,” Ibrahim said. “I got a lot of benefit from consulting with them.”

Making an impression when working with business consultants, as Ibrahim did, could boost your chances of being nominated for an SBA award, Denison said. Your community impact or personal experience could also increase your odds of winning.

“If the owners have gone through difficulties on their entrepreneurial journey and have managed to overcome them and managed to be successful, that always makes for an interesting story,” Denison said.

Whether you’re nominating yourself or another business owner, the SBA provides these tips for submitting a winning nomination form:

1. Aim to win an award that best suits your business. Rather than going for Business Person of the Year, the SBA’s signature award, you could try your luck in more niche categories, like exporting or disaster recovery.
2. Make sure the entire nomination package is complete. All packages must include a completed background form for the nominee; the nomination form, including information about the business, like address and financial history; and a photo of the nominee. Certain awards may require additional information.
3. Brag about the business. The nomination package should highlight reasons why you’re among the best in your industry and how you plan to further your success.
4. Describe contributions to the community. Explain how you give back to your community, whether it’s through monetary donations or volunteered time.

Ibrahim was aware the WBDC nominated her for an SBA award because they asked her to provide some information for the nomination form, she said. After her local SBA District Office notified her that she won, representatives visited her commercial kitchen to see the business in person, Ibrahim said.

Each SBA District Office hosts its own awards ceremony. The Connecticut SBA District Office recognized Ibrahim and the other award winners during a luncheon in May, while in Georgia, the local SBA office also organizes an annual luncheon to honor award winners, Denison said.

Other national contests

You may want to consider entering your business into additional national contests or award programs, some of which offer prize money. Here are a few to check out:

  • U.S. Chamber of Commerce Dream Big Awards: For community-focused businesses with fewer than 250 employees and less than $20 million in gross revenue; $25,000 prize available. The Chamber will name 2019 winners in October.
  • FedEx Small Business Grant Contest: Eligible small business must have fewer than 99 employees and at least six months in operation; a grand prize of $50,000 plus $7,500 in FedEx services is available. FedEx will begin accepting applications in early 2020.
  • EY Entrepreneur of the Year: Regional programs recognize top local entrepreneurs; national honorees are also named. Nominations for the 2020 Ernst & Young contest open in December.
  • Grant programs: Federal and private grant programs offer no-strings-attached funding to qualifying businesses.

Benefits of winning an SBA award

Receiving a National Small Business Week Award from the SBA could increase your company’s visibility. For example, the Georgia SBA District Office sends out a press release each year announcing the winners, which could lead to additional media opportunities, according to Denison.

Attending the awards ceremony could also be a valuable networking opportunity, noted Denison. You could connect with other award winners, as well as members of your local business community. A number of SBA lenders usually attend the luncheon in Georgia, she added.

Ibrahim made useful connections through the SBA committee that selected her for the award. During the visit to her bakery, Ibrahim told the committee about her plans to ship bean pies to customers outside New Haven. However, she couldn’t find a shipping solution that made financial sense for her and for customers.

“They would literally have to pay for $500 worth of pie to make it affordable,” she said. “That’s my biggest dilemma now.”

The SBA committee referred Ibrahim to a company that could ship smaller orders of pies for a less expensive price, Ibrahim said, which wouldn’t have happened if not for the SBA award; she currently ships throughout the state of Connecticut.

“It did connect me with resources and put me on other people’s radar,” she said.

The Home-Based Business of the Year award didn’t come with a monetary prize, but Ibrahim said she felt validated receiving the honor. Although her business has many fans in her community, it’s often challenging to get her bean pies in stores.

“It can be very disappointing when you call and ask someone to carry your product and the answer is ‘no.’ Because the answer hasn’t always been ‘yes,’” she said. “Getting the award gave me the encouragement to keep going.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
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Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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What You Need to Know to Start a Business as An Immigrant

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Immigrant entrepreneurs make a significant impact in America, often overcoming obstacles and setbacks to build businesses that contribute trillions of dollars to the national economy each year.

About 3.2 million immigrants ran their own businesses in the U.S. in 2017, according to the most recent data from bipartisan research organization New American Economy. Immigrants represent one in five entrepreneurs in America, generating $1.3 trillion in total sales and employing 8 million people in 2017. The New American Economy found that 45% of this year’s Fortune 500 companies were founded by immigrants or their children.

Yet immigrants, who comprise nearly 14% of the U.S. population, often face hurdles other business owners don’t. To help you overcome roadblocks, navigate the necessary regulations and find available funding, we’ll walk you through the steps.

How to start a business as an immigrant

Starting a business as an immigrant entrepreneur requires a few extra considerations. Here are some steps to follow to begin.

Understand laws and regulations.

Although immigrant entrepreneurs may have had successful businesses in other countries, they may not be aware of all that’s required of business owners in the U.S., said Rashed Amine, employment and training coordinator at the Arab Community Center for Economic and Social Services (ACCESS) in Dearborn, Mich.

“They need to know the laws that are established in this country and how things work,” Amine said.

Several masonry workers who attended a recent ACCESS workshop had already begun operating a business but hadn’t registered the company and were working under their own names, Amine said. He explained that if an accident occurred and the business ended up in a legal matter, all the owners would be responsible without any protection from personal liability.

Registering your business is not always required, but would separate you from the company, depending on the structure you choose. A business structure or entity, such as a limited liability company or corporation, would protect you and other owners from being personally liable for the business. A sole proprietorship or partnership would not offer protection and would be better suited for low-risk businesses.

Typically, corporations, partnerships and LLCs need to be registered in the state where you conduct business. Sole proprietorships do not need to be registered, which could be appealing to entrepreneurs concerned about their privacy or immigration status, said Edwidge Lafleur, director of the eastern Massachusetts branch of the Center for Women and Enterprise.

Apply for a Social Security or Individual Taxpayer Identification Number.

A government-issued ID is required for several aspects of running a business. Any immigrant who is lawfully residing in the U.S. can request a Social Security card, either at the same time that they apply for a visa or after receiving it.

If you do not have a Social Security number, you could apply for an Individual Taxpayer Identification Number from the IRS, which would be an acceptable form of ID to open a checking or savings account. Nonresidents can apply for an ITIN, regardless of immigration status.

You could also use an ITIN to apply for an Employer Identification Number, or EIN. An EIN would be necessary if you plan to hire employees, as you would use the number to report employment taxes to the IRS.

Open a business bank account.

Entrepreneurs should open a business bank account to keep personal and business finances separate. Having a business account would help you track your revenue and business costs independent of your personal income and expenses.

You may be able to open an account at a local bank or credit union that caters to immigrant business owners, such as Cooperativa Latino Credit Union in North Carolina. Those financial institutions may provide materials in multiple languages or employ bilingual staff members. They may also be a good place to turn to for financing, which we’ll discuss more in a later section.

Write a business plan.

A business plan is a road map for your company and should detail each aspect of the operation, from customer research to marketing plans. When applying for financing, expect to turn over your business plan to lenders, who will use it to gauge the potential success of your business.

Oftentimes, immigrant entrepreneurs don’t have time to spend writing a business plan, Lafleur said. However, the document is crucial when starting a business.

“There’s a lot of resistance to writing a business plan,” Lafleur said. “But that’s what the banks want to see.”

A basic business plan should include the following information:

  • Summary of product or service and company mission statement
  • Market analysis and industry outlook
  • Description of your management team
  • Marketing and sales strategy
  • Financial projections
  • Additional documents like resumes, business permits or credit histories

Presenting a business plan when you apply for financing would help you look professional as a business owner and could speed up the approval process.

Financing options for immigrant entrepreneurs

Once you have your ID number and business plan in place, you could start your search for financing. It could be difficult to get approved for startup financing, as lenders typically prefer borrowers who have been in business for two to three years, Lafleur said. However, the financing options below may be well-suited for immigrant entrepreneurs who need funding.

Interest-free loans

A number of financial institutions offer interest-free loans for business owners with cultural restrictions on borrowing, Amine said. In the Islamic community, for instance, it is frowned upon to take out a loan that must be paid back with interest, he said.

“There’s a number of institutions that offer interest-free loans for one reason or another,” Amine said.

For example, the Jewish Free Loan Association offers interest-free small business loans to Los Angeles residents of all faiths. Eligible business owners could receive up to $75,000 to fund their venture.

Microloans

The SBA microloan program provides small amounts of capital to underserved small business owners. Borrowers could receive up to $50,000 to start or expand a business. The program targets women, low-income, veteran and minority business owners. SBA-backed loans typically have competitive interest rates and favorable repayment terms. SBA microloans are not available to undocumented immigrants. The SBA requires nonresident applicants to submit a Social Security number, a permanent resident card or green card, or other documentation of legal status from the United States Citizenship and Immigration Services.

Local organizations may also offer microloans to immigrant-owned businesses in the community. For instance, New York-based Business Center for New Americans offers microloans from $500 to $50,000 with 3-year repayment terms.

Crowdfunding

Online crowdfunding platforms allow business owners to accept financial contributions from friends, family and members of the general public. Whether you have to repay funds or offer something in return would depend on the platform. GoFundMe lets you accept donations without providing anything in return. Others, such as Kickstarter and Indiegogo, may require you to offer a product or stake in your company in exchange for funding.

Potential hurdles for immigrant entrepreneurs

Anyone who starts a small business typically faces challenges, but immigrants usually have an additional set of hardships, Amine said. Finding child care, transportation and employment are the main concerns for immigrants who are new to America. Amine said these are obstacles that often stand in the way of starting a business.

Immigrant entrepreneurs may encounter these additional challenges:

Language barriers

If you’re unable to converse in your native language, you would need to rely on someone to translate all written and verbal communication for you, Amine said. ACCESS offers free English as a second language courses and staff members work with entrepreneurs to translate business plans and financial statements back and forth between Arabic and English, Amine said.

“We need them to understand and communicate that back to us,” Amine said. “They need to be able to have a legitimate conversation about their business.”

Language barriers made the process of starting My Little Best Friends Early Learning Center in Malden, Mass., more difficult for Hilda Torres. Torres founded the child care facility in 2012 with her cousin, Gerardo Loza. Torres immigrated to the Boston area from Mexico in 1992 with her husband and two children.

Loza had also immigrated from Mexico and offered to invest in My Little Best Friends with Torres. The business now has 33 full-time employees and 115 children from 2 months to 5 years old enrolled, Torres said, but growing the business wasn’t easy.

“It was difficult in the beginning because my English wasn’t very good, and we didn’t know anything about business,” she said. “Little by little, we started just learning on our own. But we struggled a lot.”

Immigration status

There’s nothing in the U.S. tax code that says you have to be a U.S. citizen or even hold a green card to start a business, but your immigration status could make the process more difficult. Common immigration classifications in the U.S. include:

  • Naturalized U.S. citizen: A foreign-born person granted U.S. citizenship.
  • Green card, or permanent resident: Permitted to live and work permanently in the U.S.
  • Employment Authorization Document, or EAD: Permitted to work in the U.S. for a specified period of time.
  • B-1 Visitor for Business Visa: Allows temporary status in the U.S. for business purposes.
  • Student visa: Grants entry to the U.S. for educational purposes. Some student visa holders are eligible to work.
  • Undocumented immigrant: A foreign-born person who is unauthorized to live or work in the U.S.

Although the U.S. does not provide any type of “startup visa” to bring immigrant entrepreneurs to America, there are a couple of visa classifications that could be useful in starting a business. The EB-5 visa classification grants entry to investors in commercial businesses, and the O-1 visa allows temporary status for those who demonstrate an “extraordinary ability” in business, education, athletics or the sciences. These are just a few of the many types of visas.

Business financing

When Torres opened My Little Best Friends, her cousin’s investment wasn’t enough to get started. They were approved for a loan backed by the U.S. Small Business Administration, but it took a while to find the right bank.

“Getting a loan for a startup was really difficult. We went to seven banks and nobody wanted to believe in us,” Torres said. “We felt discriminated against.”

Many entrepreneurs don’t have enough seed money to get started, Lafleur said. She’s seen immigrant entrepreneurs struggle producing the necessary financial documents when applying for financing, often because they don’t have the time or the knowledge to gather the information.

Lafleur’s experience is borne out by the research: Latino business owners, for example, struggle to find financing available at acceptable terms and tend to rely on informal financing from friends and family, according to the Stanford Latino Entrepreneurship Initiative (SLEI). Venture capital funding is also more difficult to obtain for minority and women founders.

“They need to be able to express what they think their revenues will be, what their expenses will be and what their profit margins will be,” Lafleur said. “The financial piece of it is extremely important.”

Resources for foreign-born small business owners

Like the Center for Women and Enterprise in eastern Massachusetts and ACCESS in Michigan, there are organizations across the U.S. that provide resources for immigrant entrepreneurs at the startup stage and throughout the life of the business.

“Being able to educate that population, getting them to realize what the laws are, it takes a little bit longer than several weeks,” Amine said. “That’s OK. It’s not a rush to the finish line.”

Check out these few organizations and professionals you could turn to for business assistance.

Small Business Development Centers

Through a partnership with the SBA, Small Business Development Centers provide consultation and training to entrepreneurs in cities throughout the country. There are nearly 1,000 centers that are typically hosted by colleges and universities or state economic development agencies. The SBA also supports development centers for certain demographics, such as women and veteran business owners. Find your local center here.

Legal groups

Law firms or legal groups in your area may provide pro bono services to help immigrant-owned businesses for free. For example, Volunteers of Legal Service in New York offers pro bono legal work to immigrants through its immigration and microenterprise projects. The Immigrant Legal Resource Center is a national nonprofit that also provides assistance and education to immigrants.

Local entrepreneurial community

Networking with other business owners in your community can prove beneficial, especially if you connect with fellow immigrant entrepreneurs, Lafleur said. Even when operating in different industries, entrepreneurs can often be resources for one another, she said. Some cities also have minority chambers of commerce.

Torres discusses her experience opening My Little Best Friends in Malden, Mass. at the Malden Chamber of Commerce, where she is second vice president, and periodically speaks to classes at the Immigrant Learning Center, which is also in Malden. She shares lessons she’s learned while running the business, hoping to help prospective immigrant business owners find their own path to success.

“One thing I always tell them is never give up,” Torres said. “If you have a dream that you feel like you can accomplish, fight for it.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]