Starting a business in Texas has been a popular move in recent years since the state boasts the second largest economy in the US. The Lone Star State also gives small business owners impressive tax breaks, which can make a big difference in your bottom line.
But there’s still the question of how to get the business funding you need.
Using a loan to get working capital for your small business helps you expand, pay for daily expenses, and improve your cash flow. Plus, when it’s handled the right way, it helps you build business credit.
We’ll go over what the loan options are for Texas-based businesses as well as some resources.
Local Loan Options For Small Businesses In Texas
There are several funding options for small business owners in Texas. Choose from credit unions, business grants, banks, or preferred SBA lenders.
Texas has a healthy amount of Community Development Financial Institutions (CDFIs) to choose from. The best ones typically offer more than just the loan and repayment terms. These organizations are non-profit, and offer support for new and established entrepreneurs.
For bigger financing needs and a wider selection of lending products, a bank or credit union might be better. We’ll cover a few local options that will suit your business’s needs.
Business and Community Leaders (BCL) of Texas
Business and Community Leaders of Texas is a nonprofit organization and certified SBA Micro Lender. Its mission is to help Texans build wealth through assets such as small businesses. BCL of Texas offers several loan options to support businesses of different sizes.
Their small business microloans range from $5,000 up to $50,000. The lending requirements are more flexible compared to traditional lenders. They also offer financial education and business coaching to prepare you for the challenges associated with entrepreneurship.
You can get a loan decision from BCL within three business days of applying and submitting all of your documentation.
PeopleFund Small Business Loans
PeopleFund is a Community Development Financial Institution (CDFI) dedicated to helping underserved communities get access to affordable business financing.
They work with the Small Business Administration (SBA) to provide options like the SBA 504 loan, SBA Community Advantage loan, and the SBA Microloan. Although the SBA backs these loans, the payments are made to the organization.
PeopleFund is non-profit and has flexible requirements for its loans. To ensure that the business owners they serve have everything they need to be successful, they also offer:
- Educational workshops
- Mentorship
- Business assistance services
- Small business resources
Their loan programs go up to $5 million. There are also interest rate discounts available to women and veterans.
Business Investment Growth Austin (BiG Austin) Microloans
Since 1995, BiG Austin has helped entrepreneurs in central Texas counties get the financing they need to open, grow, and expand. This non-profit CDFI offers microloans of up to $50,000 for existing small business owners.
Each of their loans requires collateral to qualify and comes with minimal loan processing costs. If you’re getting financing for a start-up, they’ll start you out with a smaller loan of up to $15,000.
To get a faster decision, they walk you through a pre-qualification process and guide you through the steps of the loan application. Similar to the other CDFIs mentioned here, BiG Austin also offers educational programs to assist you in developing your small business.
Texas Capital Bank Small Business Loans
CDFIs are great for start-ups and businesses that can’t get traditional funding. For larger financing needs, your best bet is to go with a bank. Texas Capital Bank offers a wide range of business financing options that fit most needs. Their loan products include:
- Revolving lines of credit starting at $10,000+
- SBA Loans
- Business term loans
- Accounts receivable financing
- Commercial real estate loans
- Business credit cards
Overall, Texas Capital Bank can finance up to $750,000. They even work with industries that are more difficult to fund like brokering, gas, real estate, and oil. Since it’s a traditional bank, they have rigid lending and credit requirements.
To get credit approval with the best loan terms and rates, you’ll need to have excellent credit, a few years of operating history, and solid financials.
Texas Trust Credit Union
Credit unions offer some of the most affordable financing of all financial institutions. The underwriting is more flexible compared to banks and credit requirements aren’t as strict. Each credit union has its own credit standards, but maintaining good credit will earn the best rates.
To reap the benefits of working with Texas Trust Credit Union, you’ll have to live in or own a business in one of the counties they serve.
- Dallas
- Denton
- Ellis
- Henderson
- Johnson
- Tarrant
- Tom Green
This credit union offers a full range of loan options for real estate, auto, personal, and student.
Texas Small Business Grants
Grants are always better than loans because you don’t have to pay them back. But, since it’s basically free money, the competition for grants is fierce. There are three useful grants that small business owners in Texas may want to apply for:
- Skills For Small Business: Helps Texas small business owners train their employees. Get up to $1,800 for each new employee and up to $900 for existing employees. The company must have less than 100 employees to qualify.
- Texas Enterprise Fund: If your decision to start a new project falls between Texas and another competing state, then you could be awarded a “deal-closing” grant. It’s an incentive to choose Texas as the location to set up your business. The awards are based on the average wage of newly hired employees. The company must hire at least 75 full-time workers in an urban area or at least 25 full-time workers in a rural area.
- Texas Department of Agriculture: This department has over 20 different grant programs! You don’t necessarily need to work in farming to find a grant for your business. There are grants for businesses that provide home-delivered meals as well as ones for improving the economic development of rural communities. Browse through their grant programs and you might be surprised at what you find.
You don’t have to stop at the grants that are only offered to Texas residents. You can get the most current list of federal and local small business grants, by visiting Grants.gov. Be sure to filter down the search so you can find the right grants for you.
National Loan Options For Small Businesses In Texas
You’re not limited to choosing from financial institutions in Texas. National banks will still lend to you as long as you meet their requirements. Plus with national online lenders, it’s easy to compare multiple lenders at one time.
OnDeck
OnDeck is an online lender that has been extending business loans since 2006. They carry a wide selection of financing options and some of them qualify for same-day funding. Their business loans range from $5,000 to $250,000 and repayment terms are up to 24 months.
Credit score requirements are low with a personal FICO score requirement of 600. Customer reviews are excellent at an average of 4.8 out of 5 stars on TrustPilot. Plus, decision turnaround is fast. Get a yes or no in 24 hours and have funds deposited on the same day of approval.
Funding Circle
Funding Circle is an online lender that offers term loans, SBA (7a) loans, and business lines of credit. They’re able to provide a funding decision in as little as 48 hours. Their business lines of credit range from $5,000 to $250,000.
Their application process is easy enough, but you’ll need to have been in business for at least two years and carry a credit score of at least 660. There’s no minimum annual revenue requirement but there is a one-time origination fee for their loans.
Kabbage
Kabbage is based online but is backed by American Express. Their business lines of credit range from $2,000 to $250,000 and repayment terms are up to 18 months. The time in business requirement is only one year and your personal credit score must be at least 640.
Kabbage does require a monthly revenue of at least $3,000 along with a personal guarantee to secure funding. There are also monthly fees on unpaid balances. However, funding time is still quick at about three days compared to getting a loan from the SBA.
Resources For Small Businesses In Texas
Local Texas Chamber of Commerce
The Texas Chamber of Commerce is a resource that offers networking opportunities, education, and support for small business owners. You may find a specialized chapter based on your industry or your county.
Local Texas SCORE Chapter
The Service Corps Of Retired Executives (SCORE) matches you to a mentor within your industry to help guide you through entrepreneurship.
Local Texas Small Business Development Center
SBDCs or Small Business Development Centers are an excellent resource where business owners can find free business counseling with experts in your industry. They also offer training and webinars.
How To Get a Small Business Loan in Texas
Getting a small business loan in Texas isn’t too different from getting one in another state. Follow these steps to get a Texas small business loan:
- Check your business credit score
- Research lenders to find the right one for your business needs
- Gather your business documents (financial statements, business plans, tax returns, etc.)
- Put in your application with the lender of your choice
- Submit your documentation
- Wait for a decision
- If you get approved, start paying back the loan as required after having the funds deposited.
Giving Your Loan Application The Best Chance At Approval
Each lender has their own requirements. Some are unavoidable while others are more lax. However, there are steps you can take to give your business the best chances for approval.
Have a Proper Business Plan
When applying for a loan application through a non-profit organization or a regular bank, you’ll need to have a strong business plan. This shows the lender that you’re serious about financing your business and gives them a good idea of how you plan to repay the loan.
A good business plan should include detailed information on the following:
- Executive summary
- A description of the company
- Market analysis
- Business organizational structure and management team
- Services or products
- Marketing and sales plan
- How the loan will be used
- Cash flow projections
- Supporting documents
A Good Credit Score
No matter which lender you choose to work with, you’ll still need to pay attention to your business credit. Even lenders with flexible credit requirements will verify how you handle payment obligations.
By improving your business credit scores before applying for a loan, you’ll get the best interest rates and higher loan amounts. Ultimately, this means you’ll pay less to borrow the money. If you have bad credit and need a business loan, then what can you do?
Of course, there’s paying down debts and disputing errors, but you can also build a positive payment history by getting a business credit builder loan with CreditStrong.
Credit Strong offers flexible credit builder loans that report your payment history to Equifax, PayNet, and the SBFE. These accounts range from $5,000 to $50,000 and they reserve the loan proceeds in an interest-bearing savings account while you make payments.
By building your credit this way, you’re showing future lenders that you can maintain on-time payments for an installment loan.
Get started building your business credit with CreditStrong without the sting of a hard inquiry. Find the plan that fits your needs and finish your application in less than five minutes!
Business Revenues
There are a few lenders mentioned on this list that don’t have a minimum revenue requirement for businesses, but many of them do. Your business revenues are proof that you’re able to meet the payment obligations associated with a new loan.
Overall, finding a Texas business loan is a process. You’ll have to find the right lender for your business needs and there are plenty to choose from.
Banks are typically for large amounts, high credit scores, and lower interest rates. Credit unions are usually used for more affordable options and flexible requirements.
Then you have CDFIs as an alternative to traditional lending with lower credit/revenue requirements and flexible underwriting. You’re not restricted to only using lenders based in Texas. Expand your options to include national banks or online lenders to find competitive rates.
FAQs
What Is a Good Credit Score to Get a Business Loan in Texas?
To get a business loan in Texas, you’ll need at least a 600 credit score for most lenders. However, for the best rates and repayment terms, you’ll want to have your credit score be as high as possible.
How Do I Apply for an SBA Loan in Texas?
The Small Business Administration (SBA) works with several banks, credit unions, and CDFIs in Texas. Simply choose any of these preferred SBA lenders and apply for the SBA loan through their programs.
Can You Get Denied for a Small Business Loan?
Yes, you can get denied for a small business loan. That’s why it’s important to come prepared with good credit, a solid business plan, and anything else the lender is requesting from your business.
