Texas is a fantastic place to start or grow a business, whether you’re in Austin, Dallas, Houston, or one of the hundreds of other cities in the Lone Star State…but not without a little help. Here’s what you need to know about small business loans in Texas.
How a Loan Can Help your Texas Small Business
When I say “help,” I’m referring to small business loans, which can be useful in a variety of ways. They can help you purchase what your business needs to run day-to-day, and ensure you have enough cash flow to make it through slow periods in your business.
Taking out a business loan can also help you build and grow your business credit, as long as you pay your monthly installment on time each month.
Business Loan Options for Texas Small Businesses
You have several options when it comes to business financing. Some you may qualify for, especially if you have great credit, while others may offer you financing at higher rates.
If your credit is excellent, you may qualify for a long-term loan with loan interest rates from a bank or credit union.
The U.S. Small Business Administration also offers low-interest loans like the 7(a) loan or SBA 504 loans, which may be used for things like business expenses, equipment, and commercial real estate. Learn more at SBA.gov.
Lines of Credit
If you need access to capital but don’t want it all at once (nor to have to start paying it all back at once), business lines of credit may fit the bill. Borrow from what you’ve been approved for and pay back just that amount.
If you use equipment like computers, heavy machinery, or even company trucks, there are specific equipment loans you may want to explore. The equipment you’re buying acts as your collateral, which may lower interest rates.
Having business credit cards to make purchases for your company can be useful, even if you don’t have cash in the bank. Pay off your balance in full to avoid interest charges, and look for a card with rewards you can earn for your purchases.
But what if you don’t qualify for any of the above options, maybe because your business is new or because you don’t have good credit? You may still qualify for short-term loans, though know that they tend to have higher interest rates.
Local Texas Small Business Loans
There are a number of small business loans available locally in Texas. Local, smaller banks may be more invested in community development and more willing to loan to you if you’re keeping your small business in Texas. They may have more flexibility when it comes to their underwriting processes or better interest rates, especially if they’re a credit union.
If you have a local bank or credit union you already have a relationship with, whether personally or for your small business, that’s probably a good place to start.
Other local Texas businesses that provide small business loans include:
- PeopleFund — a nonprofit that provides help to small businesses in underserved communities, including those in low income areas or those owned by people of color, women, or veterans.
- Business and Community Lenders (BCL) of Texas — another nonprofit organization, BCL is focused on providing lending to support entrepreneurship and community development for small businesses, as well as personal lending for homeownership.
- Texas Trust Credit Union — since 1936, this credit union has been serving small businesses and individuals alike in Dallas and surrounding counties.
- Texas Capital Bank — with branches in every major city in Texas, Texas Capital Bank also offers loans in harder-to-fund industries.
- Business Investment Growth Austin (BiG Austin) — if your small business is in Austin or surrounding counties, you may qualify for a microlan ($15,000 – $50,000) from BiG.
National Small Business Loans for Texas Businesses
National banks are also willing to lend to small businesses in Texas, and may offer better repayment terms for borrowers with good business credit scores. However, many of these lenders are also known for helping small business owners who may not have good credit scores get the funding they need.
Texas Small Business Grants
Small businesses in Texas can qualify for grants, as well, and it’s worth taking the time to apply. Some Texas small business grants include:
- Texas Workforce Commission Skills for Small Business Grants
- Texas Enterprise Fund Grant
- Texas Department of Agriculture Grant
In addition, Nav’s quarterly Small Business Grant awards a $10,000 grand prize and $5,000 runner-up prize regularly to small businesses throughout the U.S.
Other Resources for Small Businesses in Texas
You can also find advice, coaching, networking, and other resources beyond financing in many organizations throughout Texas. Here are a few ideas:
Find Your Local Texas SCORE Chapter
The Service Corps of Retired Executives (SCORE) matches a retired executive business mentor to a new business owner in the same industry. They can help you figure the ins and outs of running a business, from starting your business with a business plan to setting up accounting and finding legal help.
Join Your Local Chamber of Commerce
Local business owners and entrepreneurs make up the membership of the 510 chambers of commerce throughout Texas. They hold networking events and provide educational opportunities for their members, including workshops and conferences.
Take Advantage of the Texas Small Business Development Center Network
With over 60 centers located throughout Texas, the Texas Small Business Development Center Network provides consulting services for small businesses, including coaching and mentoring from other established small business owners in your industry.
How to Choose the Right Loan for Your Texas Business
Start with your eligibility. Which financing options do you qualify for? Ideally, you would apply for the loan with the lowest interest so you minimize the extra fees you pay.
Also, consider how you plan to use the funds. Some loans, especially SBA loans, may have specific requirements for how you can use loan proceeds, and there are loans like equipment financing that are for certain purchases.
How to Qualify for a Business Loan in Texas
Financial institutions may have slightly different criteria for how to qualify for a business loan, but generally, you can expect them to look at how long you’ve been in business, your credit scores, and your annual revenue.
New businesses may have difficulty qualifying for bank or SBA loans since they tend to approve applications from companies in business for two or more years. A better option for a startup may be a business credit card or short-term loan.
The higher your credit scores, both personal and business, the better the offers you’ll qualify for. More on credit scores in the next section.
What is a Good Credit Score to get a Texas Business Loan?
Each lender has its own criteria for required credit scores for small business financing. The SBA, however, does not have a published minimum credit score requirement, but many lenders will require a personal credit score of at least 640.
Some lenders may also look to see if you have business credit scores, which not all businesses do. If you don’t have them, learn how to establish business credit to expand your options.
And remember: even if you have bad credit, there are lending options for you, albeit at a higher cost.
How to Get a Small Business Loan in Texas
Lenders may vary in their application process, but expect to be asked details about your business, how long it’s been in operation, your annual revenues, et cetera. And because you may be personally guaranteeing the loan, you may need to provide personal details like your Social Security number.
Once you’ve been approved for a loan, review the loan terms, which will detail the loan amount, interest rate, and repayment schedule. Sign the agreement, and funds should be deposited into your business checking account in as little as one business day.
Ways to Use a Small Business Loan in Texas
Business funding uses are as varied as the small business owners who apply for financing.
If you have slow periods in your business, you may simply want access to working capital so your bank account never runs dry. If you’re looking to expand, you might use a loan to purchase commercial real estate and renovate new retail space. You could use the funds to purchase larger inventory orders so you can save on a per-unit basis.
An equipment loan could be used to buy updated equipment that helps you serve more customers or speed up your production line. You could use the funds to hire more help to take some of the load off of yourself.
How Do I Apply for a SBA Loan in Texas?
To apply for a SBA loan in Texas, first visit the SBA Loans website to find the loan that you’d like to apply for. You can then enter your zip code in their Lender Match and apply for the loan through your local lender. You can also apply for a SBA loan directly through your current bank or credit union if they offer them.
What Credit Score is Needed for a SBA Loan?
In order to qualify for a SBA loan, you need to have a minimum credit score of at least 640. You have a better chance of being approved for a SBA loan if your credit score is 680 or above. Nav can help you track your business and personal credit scores — set up a free account today to get started.
Can You Get Denied for a Small Business Loan?
You can be denied a small business loan for a number of reasons, including:
- Low personal credit score
- Low business credit score
- Not enough cash flow to meet loan repayment requirements
- Too much existing debt
- Previous default on a loan
- Tax liens, judgments, or bankruptcies against you
- Insufficient financial need
In addition, the SBA may deny you a small business loan if your business is in an industry that SBA doesn’t lend to or if you’re not considered a small business.
Are Small Business Loans Easy to Get?
Small business loans may seem difficult to get, but they don’t have to be. The majority of small business loan applications are not approved, often because the borrower doesn’t know that they don’t meet the minimum qualifications or don’t know which loans they actually qualify for.
Nav can help you apply with confidence by taking your small business’s credit score, history, and financial information into account before recommending loans that you actually qualify for. Our tools can also help you find ways to improve your credit score or find other ways to improve your ability to qualify for a small business loan. Sign up to start seeing your options.
A small business loan for your Texas company can and should help you elevate your business to new levels!