Texas is known for its welcoming environment for entrepreneurs. It offers a skilled workforce, a low cost of living, and predictable regulations. According to the SBA Office of Advocacy, small businesses comprise 99.8% of the state’s total companies.
Small business owners looking to start or expand a business in Lone Star State often require financing help. Fortunately, Texas offers diverse financing solutions for various businesses. There’s something for everyone, from traditional banks to online and community-based lenders. Knowing the ins and outs of the available Texas business loan options can save you time and money.
This guide will break down essential tips and resources to help you secure the funding you need, including the best loan options, the pros and cons of Texas business loans, and how to apply. Specifically, we’ll answer these questions and more:
Texans can access various business loan programs to fund their operations.
Working Capital Loans: Working capital loans in Texas are a type of financing designed to cover a business’s day-to-day operational expenses. These loans often fund inventory purchases, payroll, rent, and other short-term financial needs. They can provide businesses with the cash flow to keep operations running smoothly and seize economic opportunities. Working capital loans are typically easier to qualify for than other business loans, making them a popular choice for small businesses needing quick funding.
Business Line of Credit: A business line of credit in Texas is a flexible financing option that allows small businesses to access funds up to a predetermined limit. It works similarly to a credit card, where you can borrow and repay funds as needed, only paying interest on the amount you use. This type of financing is ideal for covering short-term expenses, managing cash flow fluctuations, or seizing growth opportunities without applying for a new loan each time.
Revenue-Based Financing: Revenue-based financing in Texas is a form of small business funding in which repayments are based on a percentage of the company’s revenue. This type of financing allows businesses to access capital without taking on additional debt, making it an attractive option for companies with fluctuating revenue streams.
SBA Loans: SBA loans are small business loans guaranteed by the Small Business Administration, providing funding to help businesses start, grow, and succeed. These loans offer favorable terms such as lower interest rates and longer repayment periods than traditional bank loans, making them an attractive option for small business owners. An SBA loan in Texas can be used for various purposes, including working capital, equipment purchases, commercial real estate acquisition, etc.
Invoice Factoring: Invoice factoring in Texas is an alternative business funding option in which a business sells its accounts receivable to a third party at a discount. This provides immediate cash flow, allowing the business to cover expenses or invest in growth without waiting for customers to pay their invoices. The factoring company then collects the total amount from the customers directly.
Merchant Cash Advance: A merchant cash advance in Texas is a form of financing where a business receives a lump sum of money upfront in exchange for a percentage of future credit card sales. Texas small businesses with fluctuating revenue streams or those needing quick access to capital use this form of funding. While merchant cash advances can provide fast funding, they often come with high fees and may not be suitable for all businesses.
Business Term Loan: Business term loans in Texas are a type of financing in which the business gets a lump sum and repays it over a set period with fixed interest and consistent monthly payments. These loans are ideal for small businesses looking to fund long-term investments like equipment purchases or expansion projects. The interest rates and terms of business term loans can vary depending on the lender and the borrower’s creditworthiness.
Equipment Financing: Equipment financing in Texas is a type of small business loan specifically used to purchase equipment or machinery needed for operations. This form of financing allows businesses to acquire necessary assets without draining their cash reserves. Typically, the equipment being purchased serves as collateral for the loan, making it easier for businesses to secure funding.
Asset-Based Loans: Asset-based loans (ABL) in Texas allow small businesses to unlock the value of the assets on their balance sheet to secure funding. ABL lenders have business assets appraised and then issue loan amounts based on the appraisal amount. The assets become collateral for the loan, meaning the lender can claim the assets in case of default. Some examples of asset-based business loans include commercial real estate loans, secured term loans, and accounts receivable financing.
Entrepreneurs in Texas also have the option of pursuing state- or city-specific loan and business funding options. These include nonprofit lenders, community-based programs, and government-backed loan options. Here are some options to consider.
BCL of Texas provides financial assistance to Texas business owners through various loan programs, including SBA 504 loans for commercial real estate. These loans offer favorable terms and low down payments, making it easier for entrepreneurs to acquire property for their businesses and stimulate economic growth in the community.
LiftFund is a nonprofit CDFI that specializes in providing various types of loans, including SBA microloans, SBA Community Advantage, SBA 504 Loans, and EDA Loans. Its focus on supporting small businesses and entrepreneurs through accessible financing options has made it a valuable resource in the community.
PeopleFund is a nonprofit organization founded in 1994 that provides small business loans, financial education, and business assistance to entrepreneurs in Texas. They offer various programs such as microloans, business coaching, and workshops to help business owners grow and succeed. PeopleFund’s mission is to create economic opportunity and financial stability for underserved communities in Texas by supporting small businesses with the resources and expertise they need to thrive.
The Austin Family Business Loan Program is a collaborative effort between the City of Austin, HUD, and various private lenders to provide small businesses with low-interest loans for expansion and job creation. Its primary goal is to support local businesses in their growth endeavors, stimulate community development, boost the city’s tax revenue, and improve Austin residents’ overall quality of life.
BiG Austin is a business investment growth organization that provides funding and support to Austin and Central Texas entrepreneurs. They offer various business loan options, including traditional loans, microloans, and lines of credit, to help businesses grow and succeed. Part of BiG Austin’s mission is to ensure fair access to capital for all entrepreneurs, regardless of background or circumstances.
Capital CDC specializes in financing small businesses in Texas. It provides loans that help improve cash flow and expand operations. Capital CDC also focuses on supporting minority-owned businesses and offers guidance on loan applications.
The Texas Small Business Credit Initiative is a program designed to provide access to capital for small businesses in Texas. Through partnerships with financial institutions, this initiative aims to support the growth and success of small businesses by offering loan guarantees and other financial assistance. This program plays a crucial role in stimulating economic development and job creation in the state.
| LOAN TYPES | MAX AMOUNTS | RATES | SPEED |
|---|---|---|---|
| Merchant Cash Advances | $7.5k – $1m | Starting at 1-6% p/mo | 1-2 business days |
| SBA Loan | $50k-$10m | Starting at Prime + 2.75% | 8-12 weeks |
| Business Term Loan | $10k to $5m | Starting at 1-4% p/mo | 1-3 business days |
| Business Line of Credit | $1k to $250k | Starting at 1% p/mo | 1-3 business days |
| Receivables/Invoice Financing | $10k-$10m | Starting at 1% p/mo | 1-2 weeks |
| Equipment Financing | Up to $5m per piece | Starting at 3.5% (SBA) | 3-10+ business days |
| Revenue Based Business Loans | $10K – $5m | Starting at 1-6% p/mo | 1-2 business days |
Texas offers a diverse economy with growth opportunities across most major sectors. With proper planning, small business owners can typically benefit from these opportunities. Here are some of the most prominent industries in the nation’s second-most populated state.
Texas is known for its thriving oil and gas industry, which accounts for a significant portion of the nation’s oil production.
Texas has a rapidly growing technology sector, with major companies like Dell, Texas Instruments, and AT&T headquartered there.
The healthcare industry is a major player in Texas, with top hospitals, research institutions, and health systems driving innovation and growth.
Texas is home to numerous aerospace and defense companies, including Lockheed Martin, Boeing, and SpaceX, contributing to the state’s economy.
Texas has a robust agricultural industry, producing a wide range of crops, livestock, and dairy products for both domestic and international markets.
Texas has a diverse manufacturing sector, with industries such as automotive, electronics, and chemical production playing a significant role in the state’s economy.
Texas small business loans offer various benefits to entrepreneurs looking to grow their businesses. One advantage is the access to capital that can help cover expenses such as inventory, equipment, or marketing. These loans can also be used to expand operations, hire more employees, or even consolidate debt.
Additionally, Texas business loans often come with competitive interest rates and flexible repayment terms, making them a practical financial solution for Texas small business owners. Furthermore, obtaining a business loan can help establish or improve credit history, which can be beneficial for securing future financing.
Some disadvantages of small business loans in Texas include high interest rates, strict eligibility criteria, and the potential for debt accumulation. Many lenders may require collateral, putting business assets at risk if the loan cannot be repaid.
Additionally, the application process can be time-consuming and complicated, requiring extensive documentation and financial information. For some businesses, taking on debt can also limit flexibility and hinder long-term growth if repayment becomes burdensome. It’s essential for business owners to carefully consider the terms and conditions of a loan before proceeding to ensure it aligns with their financial goals and capabilities.
The application’s required paperwork depends on your chosen Texas small business loan. Funds can be approved and distributed for most products in up to three business days. Here’s how to apply:
The first step is choosing the most sensible solution to the problem at hand. This should require a decent amount of research, as each product is designed for different types of expenses and cash flow cycles. Are you looking to cover a short-term or long-term cost? Is demand expected to increase or decrease in the coming months?
Considering the funds’ purpose will also help us determine the correct borrowing and terms for your needs.
Here are the documents and information required for all Texas business loans:
SBA Loans require additional documents and information. Visit our SBA Loan page to learn what’s needed for the application.
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Once you apply, a representative will contact you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
If and when you’re approved, funds for Business Term Loans, Business Lines of Credit, Working Capital Loans, Equipment Financing, Merchant Cash Advance, Revenue-Based Business Loans, and Accounts Receivable Factoring should then appear in your bank account in anywhere from 24 hours to one week. For SBA Loans, it usually takes 3-5 weeks (or more in some cases) to receive funding.
Your Texas business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.
Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred rates and terms when you next need business financing.
If your application is declined, it might be because you applied for the wrong product for your cash flow. In this case, we would likely recommend a different product with a less hazardous repayment structure.
Your application might also be declined after it is determined that you cannot afford to take on more debt at this time. Instead, your needs and financial circumstances might be better suited for another financing tool, like a business credit card or even a personal loan. Both options can be accessed through the UCS site and are usually much easier to qualify for than business loans.
If your credit score is preventing you from accessing financing, you should consider credit repair services. We can help you identify the issues that keep your score down and develop practical solutions for eliminating them.
Texas small businesses have several options for lenders.
Traditional lenders include banks and credit unions in Texas, such as Texas First Bank, Texas Capital Bank, and Moody Bank. These financial institutions offer business loans to entrepreneurs and small business owners. Local banks may provide more personalized service and a better understanding of the local market than larger banks.
Traditional business loans from these institutions typically require a solid credit history, collateral, and a detailed business plan to secure funding for business growth and expansion. Texas business owners need to explore their options with both local and large banks to find the best financing solution for their specific needs.
Texas businesses looking for funding options beyond traditional lenders like banks can turn to alternative lenders such as nonbank lenders or online lenders. These alternative lenders offer a variety of business loan products tailored to the needs of small and medium-sized businesses in Texas.
Nonbank lenders often have more flexible lending criteria and faster approval processes than traditional banks, making them an attractive option for businesses needing quick financing. Online lenders provide convenient access to funding through digital platforms, allowing businesses to apply for loans online and receive funds quickly.
The rise of fintech business financing marketplaces has revolutionized the lending landscape in Texas. These platforms connect entrepreneurs with a diverse network of lenders, streamlining the borrowing process. Fintech platforms like United Capital Source leverage technology to provide access to various funding options, empowering business owners to find the best financing solutions for their needs.
CDFIs offer unique advantages for small business funding. They focus on underserved communities and provide lower interest rates and more flexible terms than traditional banks. They understand local markets and cater to specific needs. Many also offer supportive services that help businesses grow.
Texas offers various assistance programs for entrepreneurs, especially those in underserved areas. Here are some Texas business assistance programs.
Texas has six SBA offices located across the state. These offices offer resources and assistance to business owners. Each office provides guidance on applying for loans and understanding the requirements.
Each office has trained staff ready to assist with questions about loan programs and applications. They also provide workshops and seminars to educate business owners about financing options.
The small business technology transfer funding programs support innovative companies, encourage research and development activities, and help small businesses partner with research institutions to create new technologies.
For instance, the STTR program provides funding for projects that can lead to commercialization. This funding helps small businesses develop new products or services. In Texas, many tech startups benefit from this assistance.
SCORE is a valuable resource for small business owners seeking guidance and support. This organization provides free mentoring services from experienced business professionals who volunteer their time to help entrepreneurs succeed. SCORE offers assistance in various areas, such as business planning, marketing strategies, financial management, and more.
By leveraging the expertise of SCORE mentors, small business owners in Texas can access valuable insights, advice, and support to overcome challenges and achieve their business goals. SCORE provides a crucial support system for entrepreneurs starting or growing their businesses in Texas.
The Texas Governor’s Office of Small Business Assistance provides resources and support to small businesses in the state. It offers guidance on starting, growing, and expanding small businesses and assistance with regulatory compliance. The office aims to help small businesses thrive and contribute to the state’s economy through workshops, webinars, and one-on-one consultations.
The Economic Growth Business Incubator (EGBI) in Texas is a valuable resource for aspiring entrepreneurs looking to start or grow their small businesses. EGBI offers training, mentorship, and support services to help individuals navigate the challenges of launching a successful business.
Through EGBI, entrepreneurs can access workshops, one-on-one consultations, and networking opportunities to help them develop their business ideas and achieve long-term success. The organization plays a crucial role in fostering economic development and job creation in the local community.
AVANCE Child Care Business Coaching in Texas offers comprehensive support and guidance to individuals looking to start or grow their childcare businesses. Through personalized coaching sessions, workshops, and resources,
AVANCE helps entrepreneurs navigate the unique challenges of the childcare industry. Their program equips participants with the skills and knowledge needed to succeed in this competitive market, ultimately contributing to the community’s economic growth.
You may be interested in one of the following business grant programs in Texas. You can also check with your business development center or local Community Development Financial Institution (CDFI) for additional programs.
Here are some Texas tax credits to consider for your business.
Bad credit business loans in Texas can provide a lifeline for businesses struggling with poor credit scores. These loans provide access to much-needed capital when traditional lenders may turn businesses away due to their credit history. This can be crucial for companies looking to expand, cover unexpected expenses, or stay afloat during tough times.
However, taking out a bad credit business loan has drawbacks. One major drawback is the higher interest rates associated with these loans, which can significantly increase the overall cost of borrowing. Additionally, some lenders may require collateral or personal guarantees, putting business owners’ assets at risk if they cannot repay the loan.
Navigating business loans in Texas can be a game-changer for your enterprise. Knowing the various loan types, specialized financing options, and the industries thriving in Texas is crucial.
Understanding the pros and cons helps you make informed choices. Knowing how to apply and what to do if declined is crucial for your success. Take charge of your business journey. Explore lenders and government programs that can support your goals.
Fraud Disclosure:
Please be aware that individuals have been fraudulently misrepresenting to business owners (and others) that United Capital Source, Inc. (“UCS”) can assist small businesses in receiving government grants and other forgivable business loans, when in fact those grants or loans do not exist or are not available. These individuals have ulterior motives and are engaging in the unauthorized use of the names, trademarks, domain names, and logos of UCS in an attempt to commit fraud upon unsuspecting small business owners.
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