Texas Small Business Loan Options

Did you know that there is 2.8 million small businesses in Texas? Or that these small businesses employ 4.8 million people? Texas is a great place to start or grow a business, whether you’re in Austin, Dallas, Houston, or one of the hundreds of other Lone Star State cities… but not without a little help. Here’s what you need to know about Texas small business loans.

How a Loan Can Help Your Texas Small Business

When I say “help” I am referring to small business loans, which can be helpful in a number of ways. They can help you buy what your business needs to run day-to-day and make sure you have enough cash to get you through times of downturn 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 payment on time each month.

Business Loan Options for Texas Small Businesses

You have several options when it comes to business financing. Some may qualify for you, especially if you have good credit, while others may offer you financing at higher rates.

COVID-19 pandemic loans

In addition to two federal loan programs, the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL), there have been several COVID-19 Small Business Loan and Grant Programs Available in Texas, including loans from PeopleFund and various municipal governments. Check the links for the most recent information.

Bank loans

If your credit is excellent, you may be eligible for a long term loan with low interest rates from a bank or credit union.

SBA loans

The US Small Business Administration also offers low-interest loans like the 7 (a) loan or SBA 504 loans, which can be used for things like business expenses, equipment, and commercial real estate. . Learn more about SBA.gov.

Credit lines

If you need access to capital but don’t want it all at once (or have to start paying it off all at once), business lines of credit can do the trick. Borrow from what you have been approved for and only pay back that amount.

Equipment financing

If you use equipment like computers, heavy machinery, or even corporate trucks, there are specific equipment loans you may want to explore. The equipment you buy serves as collateral, which can lower interest rates.

Credit card

Having professional credit cards to make purchases for your business can be helpful, even if you don’t have money 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.

Short term loan

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 be eligible for short term loans, but be aware that they tend to have higher interest rates.

How to Choose the Right Loan for Your Texas Business

Start with your eligibility. What financing options are you eligible for? Ideally, you would apply for the loan with the lowest interest rate to minimize the additional fees you pay.

Also think about how you plan to use the funds. Some loans, especially SBA loans, may have specific requirements as to how you can use the loan proceeds, and there are loans like equipment finance that are intended for certain purchases.

How To Qualify For A Texas Business Loan

Financial institutions may have slightly different criteria for qualifying for a business loan, but in general you can expect them to look at how long you’ve been in business, your credit scores, and your annual income.

New businesses may have difficulty qualifying for bank or SBA loans, as they tend to approve applications from businesses that have been in business for two or more years. A better option for a startup may be a business credit card or a short-term loan.

The higher your credit scores, both personal and business, the better the offers you will be eligible for. More information on credit scores in the next section.

What Is A Good Credit Score For Getting A Texas Business Loan?

Each lender has their own criteria for the credit scores required 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 find out if you have any business credit scores, which not all businesses do. If you don’t have them, learn how to set up business credit to expand your options.

And remember: even if you have bad credit, there are loan options available to you, albeit at a higher cost.

How to get a small business loan in Texas

Lenders can vary in their application process, but expect to be asked for details about your business, how long it has been in business, your annual income, and more. And because you can personally guarantee the loan, you may need to provide personal information such as 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 the funds should be deposited into your business checking account in just one business day.

Ways to Use a Texas Small Business Loan

The uses of business financing are as varied as the small business owners who apply for financing.

If you have slack periods in your business, you might just want to have access to working capital so that your bank account never runs out. If you are looking to expand, you can use a loan to buy commercial property and renovate new retail space. You can use the funds to purchase larger inventory orders to save per unit.

An Equipment Loan can be used to purchase upgraded equipment that helps you serve more customers or speed up your production line. You could use the funds to hire more help to relieve yourself.

A small business loan for your Texas business can and should help you take your business to new levels!

This article was originally written on July 8, 2021.

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