Small Business Loans in Texas

Texas is one of the nation’s largest states, which means it should be no surprise that 3.1 million businesses call it home. However, what might be surprising is the fact that over 99% of those businesses belong to small business owners. Luckily, the Lone Star State offers plenty of resources and funding to help those small businesses succeed. Here’s what you need to know about small business loans in Texas.

Business loan options for Texas small businesses

Here are some business lenders that operate throughout the entire Lone Star State.

Business and Community Lenders of Texas (BCL)

Business and Community Lenders of Texas is a Community Development Financial Institution (CDFI) that provides funding to Texas businesses, as well as housing assistance. They provide several different types of financing, including:

• New Business Lending: Startup business loans can be hard to find, but the BCL of Texas offers loans from $20,000 to $50,000 for businesses with less than a two-year business history.
• Small and Diverse Growth Fund: The Small and Diverse Growth Fund offers loans up to $50,000 for women and minority-owned businesses.
• Business Growth Fund: More established businesses can access loans ranging from $50,000 to $300,000 to fund their business needs from BCL’s business Growth Fund.
• Rural Business Lending: For businesses in communities with populations of 50,000 people or fewer, BCL offers loans from $50,000 to $250,000 to encourage expansion.
• SBA 504 Loan Program: BCL also partners with the U.S. Small Business Administration (SBA) to offer SBA 504 loans, which can be used to purchase real estate or equipment.

The first step toward applying for a loan with Business and Community Leaders of Texas is filling out their lending inquiry form. From there, one of their loan officers will help match you to the loan program that best suits your business and work with you to apply. If approved, you’ll also get free business coaching services included over the life of the loan.

PeopleFund

PeopleFund is another CDFI lender in Texas. The organization’s mission is to provide economic opportunity for underserved communities in the state by providing a mix of resources, education and access to capital.

They mainly focus on a few different types of SBA loans, including:

• SBA 504 Loans: As mentioned above, SBA 504 loans partner with Certified Development Companies (CDCs) to offer financing for real estate and large equipment purchases.
• SBA Microloans: Those looking for smaller loan amounts may want to consider SBA microloans. With funding up to $50,000, microloans may be a good choice for those who don’t qualify for loans with more traditional financial institutions.
• Flash Funds: PeopleFund also offers Flash Funds up to $25,000, aimed at providing business owners with low-interest funds when they need them most.

While you’ll be subject to the typical SBA qualifying requirements for most of the loans PeopleFund offers, its Flash Funds work a bit differently. For these loans, you’ll need an EIN number, a copy of your business plan, three months of personal and bank statements and a credit score of at least 600. Although they have branches throughout the state, the easiest way to apply for one of their loans is to fill out an online application. In addition to applying for funding, small business owners can also take classes through PeopleFund.

Texas Capital Bank

Unlike the other two lenders on this list, Texas Capital Bank is not a nonprofit. It’s a traditional financial institution with brick-and-mortar branches in the Austin, Dallas, Fort Worth, Houston and San Antonio metro areas.

With that in mind, you’ll likely face stricter qualifying requirements than you would find with a nonprofit. That said, if you can qualify, you may have access to more funding, as Texas Capital Bank partners with Lendistry to offer business loans up to $5,000,000.

The bank offers SBA loans, term loans, non-revolving lines of credit and commercial real estate financing. In particular, they provide funding for established businesses, startups, contractors and nonprofits.

Local Texas small business loans

Some lenders focus on serving Texas businesses in specific metro areas. Here are some small business lenders who may be local to your area:

Business Investment Growth Austin (BiG Austin)

Business Investment Group Austin offers microloans to growing businesses in Austin, Texas, and its surrounding counties. Startups with at least a three-month business history can qualify for up to $15,000 in funds, while more established businesses with at least a year in business can borrow a total of $50,000.

The process to apply starts with filling out a prequalification application. If you’re prequalified, you’ll work with a loan officer to fill out the official loan application and gather your supporting documentation. From there, loan approval can take two to four weeks. If approved, you’ll be assigned a closing date and given a check at closing.

LiftFund

LiftFund is a nonprofit organization that offers small business loans, SBA loans and microloans to startups, as well as women and minority business owners. They have a few branches throughout Texas, including Dallas-Fort Worth, Houston and San Antonio, as well as in a few other states across the country. To be eligible, you’ll need to live in Texas or one of LiftFund’s other service areas for at least six months as well as meet standard business loan requirements.

LifTFund provides loans for commercial real estate purchases, equipment financing, inventory, leasehold improvements, supplies, vehicles and working capital expenses. Obtaining the funds starts with accessing the organization’s online application portal. From there, a team member will help match you with the loan program that best suits your needs.

Austin Family Business Loan Program

Austin’s Family Business Loan Program is a partnership between the city and the Department of Housing and Urban Development (HUD) aimed at creating jobs and helping businesses expand.

Funds can be used for buying or renovating commercial real estate, purchasing equipment, refinancing existing debt or covering working capital expenses. In addition, the program boasts low interest rates and flexible repayment terms, provided that borrowers meet the program’s eligibility requirements and pledge to create one job for every $35,000 borrowed.

National small business loans for Texas

If none of the above small business lenders in Texas suit your needs, consider a nationwide option instead. Here are some of our top picks:

Funding Circle

Funding Circle is an online lender that offers business term loans and lines of credit. Here’s a closer look at the details of its term loans:

• Loan terms: 6 to 84 months
• Interest rates: 11.29% to 30.12%
• Loan Amounts: $25,000 to $500,000

The biggest benefit of Funding Circle is its flexible loan amounts and terms, plus the fact that it offers a line of credit in the event that you need more flexible funding. However, in exchange you’ll face some pretty strict qualifying requirements. Funding Circle requires a two-year business history and a minimum credit score of 660 in order to qualify for one of its loans. In addition, you’ll need to put up collateral to secure your business loan.

SBA 7(a) loans

Many of the lenders above offer SBA loans in addition to their own direct funding. However, it’s important to note that they aren’t the only ones who provide this type of financing. The SBA partners with financial institutions all over the country to offer its loan programs, including the popular SBA 7(a) loan.

There are many types of SBA 7(a) loans, which can be used for a wide variety of purposes, such as working capital expenses, operating costs, commercial real estate purchases and equipment financing. While each subtype will have its own individual loan terms, here’s a general overview of what you should know:

• Loan terms: 120 to 300 months, depending on how the funds are being used
• Interest rates: Base + 3.00% to base + 6.5%, depending on loan amount
• Loan amounts: Up to $5,000,000

The SBA guarantees its loans, offering lower rates and longer repayment terms. However, in exchange, you should be prepared to face a lengthier application process and longer funding times.

Bank of America

If you’d rather borrow from a traditional bank, Bank of America may be a good option. As one of the largest banks in the U.S., Bank of America has branch locations all over the country. It offers a wide array of different loan products, including secured and unsecured business term loans, secured and unsecured lines of credit, business auto loans, equipment financing, commercial real estate loans and SBA loans.

Let’s take a look at its term loans:

• Loan terms: 12 to 60 months
• Interest rates: Starting at 7.25% for secured loans and 7.75% for unsecured loans*
• Loan amounts: Starting at $10,000 for unsecured loans and $250,000 for secured loans

*The rates stated reflect the interest rate, rather than the annual percentage rate (APR), which includes interest and fees, so it may be difficult to estimate your final rate until you receive a copy of your loan agreement.

Like most brick-and-mortar financial institutions, Bank of America isn’t the most upfront when it comes to disclosing its rates and terms. However, since it’s a traditional lender, it’s safe to assume that it likely imposes stricter qualifying requirements than its alternative lending counterparts. Still, if you can qualify, you may be able to secure a better interest rate than you might find with an online lender.

Other options for your small business in Texas

Now that you have a better idea of where to find funding, it’s time to look at some other resources for small businesses. While this is by no means an exhaustive list of all the help that’s available in the state, it should be enough to get you started.

Texas Governor’s Office of Small Business Assistance

Texas has a wide variety of resources for small business owners. While banks and nonprofit lenders can provide financing, the Texas Governor’s Office of Small Business Assistance offers support for small businesses, including help with getting permits and licenses, assistance with regulatory compliance, as well as hosting webinars and in-person summits.

Grants

Small business grants are money that doesn’t need to be repaid. Often, you need to apply to receive this type of funding and competition will most likely be fierce. That said, you never know what could happen. Here are a few opportunities to check out:

• The Center for Women Entrepreneurs StartHER Grant: StartHer Grants offers 25 grants worth up to $5,000 each to majority-women-owned businesses in Texas with five or fewer employees.
• Texas Workforce Commission (TWC) Skills For Small Businesses Grant: The Texas Workforce Commission provides grants to help cover the cost of training full-time employees at a local community college or technical school. They’ll provide $1,800 for each new hire and $900 to train employees who have been at the company for more than a year.
• Texas Enterprise Fund: The Texas Enterprise Fund (TEF) offers grants to businesses that are looking to expand, provided that they create new jobs in the process. Although there are other eligibility requirements, it’s important to note that eligible businesses must create at least 75 new jobs in urban areas or 25 new jobs in rural ones.

Coaching and mentorship

Often, receiving coaching and mentorship can make a big difference for small business owners. While a few of the lenders on this list also offer business coaching in addition to funding, here are a few more resources to check out if you’re looking for personalized guidance:

• SCORE: SCORE is a national organization with a mission to strengthen small businesses with coaching and mentoring. They have branches throughout multiple cities in the Lone Star State, including Austin, Houston, Dallas and Fort Worth.
• Economic Growth Business Incubator (EGBI): Residents of Austin and Central Texas may benefit from the area’s Economic Growth Business Incubator. The organization’s mission is to provide training, coaching and support to small business owners who may otherwise face barriers to their success.
• AVANCE Child Care Business Coaching: Headquartered in San Antonio with affiliate
• chapters around the state, AVANCE offers free coaching for child care businesses and professional development.

Small business development centers

In addition to providing funding, the U.S. Small Business Administration also operates small business development centers (SBDCs) across the country. These centers are designed to give small business owners the counseling, training and tools that they need to succeed.

You can find your closest SBDC by visiting the link above and putting your five-digit zip code into the locator tool at the bottom of the page.

How to get a small business loan in Texas

If you’re looking for a Texas small business loan, here’s what you need to know before applying for financing:

What do you need to apply for a small business loan in Texas?

Once you have a better idea of where you may try to find funding, it’s a good idea to start thinking about how to pull your loan application together. While each lender will impose their own specific business loan requirements, here’s a general overview of what you’ll likely need to provide.

1. Credit score

Two of the most impactful factors that lenders will consider during the loan application process are your personal and business credit scores. As a rule of thumb, the higher these scores are, the more likely you are to be approved and the better the interest rate you’re likely to receive.

Reporting for both scores is based on a number of factors, but in either case, payment history and debt usage play a big role.

2. Business plan

Next, you’ll likely need to submit a comprehensive business plan. Your business plan will provide the lender with an overview of your business model.

You should be sure to include details on how the loan funds will be used, specifics on your company’s current financial standing and your plan for how you intend to generate enough revenue to comfortably pay back the loan.

3. Annual revenue

As you might be able to guess, the term “annual revenue” refers to the amount of money your business has made over the past year — before taxes. Typically, lenders will ask to see your business tax returns in order to determine this information.

Most small business lenders will list their minimum annual revenue under their eligibility requirements, so be sure to do your research before you apply.

4. Time in business

Since not all small businesses succeed, it’s generally considered riskier to lend to newer, younger businesses. As a result, many traditional financial institutions impose a two-year time-in-business requirement for lending purposes.

Don’t worry, though — if your business is newer, it’s still possible to find funding. You’ll just need to concentrate on finding a lender that specifically offers startup business loans instead.

5. Collateral or personal guarantee

Depending on your lender or type of loan, you may be asked to secure the loan with collateral or sign a personal guarantee. Providing these often makes it easier to be approved for the loan.

However, in exchange, you could face some fairly steep consequences if you default. Offering collateral gives the lender the right to repossess your asset in the event that you are unable to keep up with your payments. Meanwhile, a personal guarantee means that you’ll personally be on the hook for repaying the loan if your business is ever unable to continue footing the bill.

6. Supporting documentation

In addition to the above information, lenders often ask that you submit additional supporting documentation with your loan application. Each document tells a story about the overall health of your business.

While there is no hard-and-fast rule as to what’s required, some commonly requested supporting documents are:

• Business financial statements, such as balance sheets and income statements
• Personal financial statements for any business partners
• Recent copies of any applicable bank statements
• Information on any assets being used as collateral
• Governing documents, such as articles of incorporation or bylaws
• Business licensing and permit information

Tips to decide what loan terms are best for you

When you’re ready to compare business lenders, it’s important to consider the types of business loans that they offer, as well as their loan terms. Here’s a closer look at the different factors that you should consider during your search.

• Fixed APR: While taking out a loan with a variable APR can be enticing in the short term because of a lower introductory interest rate period, loans with fixed APRs typically end up being a better fit for many businesses in the long run because your payment won’t change over time. That stability can make planning around repayment much easier.
• Comfortable loan term: Usually, loans with longer terms come with lower monthly payments, but in exchange you’ll pay more in interest charges over time. In contrast, loans with shorter terms have higher monthly payments, but you’ll pay less in interest overall. Conventional wisdom states that it typically makes financial sense to choose the shortest loan term for which you can comfortably afford the monthly payment.
• Low fees: Next, you’re going to want to consider the fees that come with each loan offer. Some lenders charge an origination fee to cover the administrative costs of generating a new loan while others charge prepayment penalties or late payment fees.
• Overall transparency: It’s also a good idea to consider the overall transparency of the lender regarding the loan’s repayment terms. Make sure that you have a clear understanding of all your obligations before signing on the dotted line. Don’t be afraid to reach out to the lender for more clarification if you have any questions.