Business Loans in Texas: Ways to Get the Financing You Need
When looking for financing to fund growth and other expenses, many apply for business loans. Texas companies are no different. But you may be wondering what your options are?
In this article, we’ll look at the types of business loans available in Texas, alternative funding options, and how to watch out for SBA loan scammers.
9 Types of Business Loans in Texas
When you need financing, loans are one possible solution. Here are nine types of business loans in Texas that you can consider applying for.
1. SBA 7(a) Loans
U.S. Small Business Administration-backed 7(a) loans offer borrowers low interest rates and flexible repayment options. You can use SBA 7(a) loans for working capital, equipment, machinery, real estate, expansion, and refinancing.
This program offers a variety of 7(a) loan types. But the standard loan allows you to borrow up to $5 million and repay it over 10 or 25 years. As the SBA underwrites the loan, they’re often easier to get approval for than a traditional bank loan.
2. SBA 504 Loans
Use SBA 504 loans to purchase major assets like real estate and business equipment. Funding for these long-term fixed-rate loans comes from the SBA and private lenders. To apply, approach a local Certified Development Company (CDC).
SBA 504 Loans typically have lower down payments and longer repayment terms than traditional bank loans. Repayment terms will vary based on your specific loan, but maturity terms of 10, 20, and 25 years may be available. The application process may take up to six months, in some cases.
The maximum loan amount is $5 million, but there is a maximum of $5.5 million for some energy projects.
3. SBA Microloans
SBA Microloans are small, short-term loans for small businesses and for startup entrepreneurs looking for help to get off the ground. You can use the loans for a variety of purposes, including working capital and the purchase of equipment and inventory.
With a microloan, you can borrow up to $50,000 and repay it over up to six years. Generally, SBA Microloans are easier to obtain than traditional bank loans, but they may cost more. A traditional bank loan may have an interest rate in the range of 2% to 13%, while an SBA microloan’s interest rate is usually between 8% and 13%.
Some microloan lenders offer free business training and technical assistance to borrowers.
4. SBA Community Advantage Loans
The SBA Community Advantage Loan program offers up to $350,000 in government-backed funding to small businesses in underserved communities. They’re designed for businesses that otherwise would struggle to qualify for traditional bank loans due to their size or location.
The SBA has set maximum interest rates for these loans based on the amount being borrowed and the Wall Street Journal prime rate. If you borrow $50,000 or less, the max interest rate is the prime rate plus 6.5%. For loans above $50,000 and up to $250,000, the interest rate is the prime rate plus 6%, and for loans above $250,000 and up to $350,000, it’s the prime rate plus 4.5%.
As of March 28, 2023, the Wall Street Journal prime rate is 8%, but this can fluctuate up and down.
5. Traditional Bank Loans
You don’t have to use an SBA program if you want a business loan. Texas companies can still approach banks and other financial institutions for funding.
Eligibility levels are stricter with banks. You will generally need a credit score of 700 or higher. You have the best chance of getting a bank loan from the bank you have a checking account with as long as you’ve kept your account in good standing.
6. Business and Community Lenders (BCL) of Texas
BCL of Texas is a not-for-profit organization focused on helping small businesses in the state grow. They offer these three loan options of their own:
Beginning Businesses program: From $5,000 to $50,000 for new, small, and diverse businesses
Growing Businesses program: From $50,000 and up to $300,000 depending on which lending sub-program is used
Dallas Small Business Diversity Fund: $10,000-$75,000 to traditionally underserved businesses operating in Dallas County
7. PeopleFund
PeopleFund is a nonprofit organization that provides loans, assistance, and business education to people in Texas who would otherwise find it difficult to access commercial finance. Their current main programs are:
BIPOC Accelerator Program Application: This program provides up to $50,000 in loan funding plus a grant of up to 10% of the loan amount for anyone who identifies as Hispanic, Latinx, Native American, Native Hawaiian, Alaskan Native, Desi, Asian, or Pacific Islander.
Capital for Women: This is a flexible loan program for women-owned businesses. They are offering a 2% interest rate discount on loans of $100,000 or less in partnership with the Tory Burch Foundation Capital Program and Bank of America.
Downtown Revolving Loan Fund: This is a specialist loan package to encourage businesses to open in the central business district of the City of Eagle Pass, particularly Main Street.
Flash Funds: You can apply for up to $25,000 in funding with low interest rates and fees.
PeopleFund no longer offers disaster loans, originally launched to help companies cope during the COVID-19 pandemic.
8. Business Investment Growth Austin (BiGAUSTIN) Microloans
For companies in Texas that don’t qualify for a conventional bank loan, you can apply for funding from BiGAUSTIN. They offer loans of up to $15,000 for startups and up to $50,000 for existing businesses with one- to six-year repayment periods.
To qualify, you must be at least 21 years old and own more than 51% of your business. You'll also need a written business plan when you apply. It takes 2-4 weeks for the loan application to be processed.
9. Texas Capital Bank Small Business Loans
Texas Capital Bank has several small business loan programs including:
Standard business term loans
Small Business Administration (SBA) loans
Trade finance for export and import business
Lines of credit
Equipment financing
Asset-based funding (equipment, inventory, and accounts receivable accepted)
Other Business Finance Options for Texas Small Business Owners
Five other options you can consider for business financing are:
Business credit cards: You can apply through your bank and other financial institutions for a credit card. A handful of them work with new businesses. Credit cards are expensive, but they can help you manage cash flow if an unexpected bill comes in.
Small business grants: There are a number of grants available to businesses, including the Texas Enterprise fund run by the Texas Workforce Commission and the National Association for the Self-Employed (NASE).
Commercial real estate loans: If your business owns commercial property that has equity, you may be able to borrow against it to meet current business needs.
Working capital advances: Working capital advances help businesses cover costs often caused by seasonal variations, unexpected bills, or asset/inventory purposes.
Business line of credit: Similar to a business credit card, a business line of credit is a type of revolving credit. You get a credit limit and can withdraw as much as you need up to that limit. You only pay interest on the funds you use.
Beware of SBA Scammers in Texas
The SBA is one of the state’s major providers of business loans. Texas has been warned though that scammers are pretending that they are SBA representatives in an attempt to steal money and valuable data from small business owners.
Be suspicious if someone approaches you from the SBA and they ask for:
A fee: The SBA does not charge fees to process loans or for other services.
Your bank account details: The SBA will only ever ask for this well into the application process, not at the start.
If you have been targeted, call the SBA's Office of Inspector General at 800-767-0385 or you can submit a complaint online or by mail. Alternatively, you can file a complaint with the Federal Trade Commission.
Alternatives to Business Loans in Texas From Backd
There are options available if you’re looking for business loans in Texas — from the Small Business Administration’s programs to traditional financial institutions and nonprofit organizations. But there are also other funding options available, including business lines of credit and working capital advances.
With Backd, you can get between $10,000 and $750,000 in financing with a business line of credit. With a working capital advance, you can get between $10,000 and $2 million in funding.
Apply in just three minutes today to get the financing you need as soon as tomorrow.
