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Texas Business Loans: Do You Qualify for the Best Options?

Everything's big in Texas - and so are the options for small business loans Texas business owners can tap into.
Last updated on September 8, 2020

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⏰ Estimated read time: 14 minutes

A wide variety of organizations provide financial assistance and other resources to entrepreneurs who want to start or grow a business in Texas. These organizations provide a mix of small business loans, grants, and mentorship and training. Eligibility for these resources depends on the stage of your business, your company's impact on the local economy, as well as the industry you’re in. Some financial assistance programs are reserved for women, minorities and other underserved entrepreneur communities.
Texas is the second-largest state in the U.S. by size and 2.6 million small businesses call it home. This state has a diverse economy, with thriving businesses in the petroleum and natural gas, energy, electronics and biomedical industries. On average, Texas entrepreneurs receive $65,093 in business financing from lenders. A loan can go a long way toward helping you launch or scale your business.

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Texas small business loans: Top 5 local options

Both banks and nonprofit lenders provide loans to small businesses in Texas. The Texas Governor’s Office is a good place to contact to learn about opportunities specific to your industry. The office’s job is to help businesses located in Texas, create jobs and strengthen the local economy.
The top five options for Texas small business loans include:
  1. Business and Community Lenders (BCL) of Texas.
  2. PeopleFund Small Business Loans.
  3. Business Investment Growth Austin (BiGAustin) Microloans.
  4. Texas Capital Bank Small Business Loans.
  5. Texas Trust Credit Union.

Your local funding guide to Texas small business loans

In this guide, we’ll describe in detail each of these five ways to get small business loans in Texas. We’ll also cover local grant opportunities, other resources for Texas entrepreneurs and some nationwide options that can help you reach your business goals.

1. Business and Community Lenders (BCL) of Texas

First up, Business and Community Lenders (BCL) of Texas is a nonprofit organization that provides lending, homeownership, entrepreneurship and community development assistance across the state. Here’s an overview of their business loan programs:
  • New business lending: Loans between $20,000 and $50,000 for new businesses (under two years old) that can be used to buy equipment, real estate, inventory and other business essentials.
  • Small and diverse growth fund: Microloans of up to $50,000 for women and minority entrepreneurs in Texas.
  • Business growth fund: Loans for businesses that are over two years old ranging from $50,000 to $300,000.
  • Rural business lending: BCL partners with the U.S. Department of Agriculture to extend loans of up to $250,000 for businesses in rural communities (population of 50,000 or less) across Texas.
  • SBA loans: BCL partners with the U.S. Small Business Administration to provide SBA 504 loans, which can be used to acquire equipment or real estate.
BCL of Texas is a good option for startup funding since they work with businesses that are under and over two years old. Normally, it can be very difficult for startups to obtain business loans. Even better, all of BCL’s loan programs come with free business coaching for the entire term of the loan. Eligibility requirements vary by loan type, but the first step is to fill out BCL’s online questionnaire. A representative will contact you to further discuss your Texas business loan options.

2. PeopleFund

Like BCL Capital, PeopleFund is another nonprofit lender in Texas. PeopleFund focuses on providing financing to underserved entrepreneur communities, including women, people of color, veterans and businesses located in low-income areas.
The highlights of PeopleFund’s business loans are:
  • Low down payment/business owner investment.
  • No prepayment penalties.
  • Flexible underwriting and collateral requirements.
  • One-on-one and group business training.
PeopleFund participates in several SBA loan programs and can provide business loans of up to $350,000. Interest rates range from 7% to 15%, with discounts for the underserved groups mentioned above. You’ll get a maximum of seven years to pay back a PeopleFund loan. PeopleFund also offers disaster loans to Texas businesses that are affected by hurricanes and other natural disasters. PeopleFund has several physical branches throughout Texas, but the easiest way to get started is by completing their online application.

3. Business Investment Growth Austin (BiGAustin) microloans

Our next Texas business loan provider is Business Investment Growth Austin (BiGAustin), a microlender that provides business loans in several Texas communities. They offer a streamlined application process, so you can get an approval decision within two to four weeks.
Here are the basic eligibility criteria for a BiGAustin loan:
  • The business owner is at least 21 years of age and a U.S. citizen or legal permanent resident.
  • The loan applicant has at least a 51% interest in the business.
  • The business is for-profit.
  • The business owner is unable to qualify for or afford a conventional bank loan.
  • The business owner must have a written business plan.
  • The business owner is currently on federal, state, county and municipal taxes.
  • The business owner carries auto insurance and general liability insurance.
  • The business owner is not in active bankruptcy.
  • The business must be located in one of the following Texas counties: Bastrop, Bell, Blanco, Burnet, Gillespie, Hays, Lampasas, Lee, Llano, Mason, McCulloch, Milam, San Saba, Travis or Williamson.
Startups with at least three months of operating history can access funding up to $15,000, whereas businesses with at least one year of operating history can access up to $50,000 in funding. Repayment terms span one to six years. For startups, BiGAustin requires that the owner has a second income stream other than the business, such as a second job, spousal income or retirement savings.

4. Texas Capital Bank small business loans

So far, the Texas small business loan options we’ve discussed have been well suited for entrepreneurs who need smaller amounts of capital. However, if you need more money, then consider applying for a business loan with Texas Capital Bank. This bank has branches in every major Texas city and they offer up to $750,000 in capital.
Texas Capital Bank offers SBA loans, term loans, lines of credit, trade finance for import-export businesses and equipment financing. They even offer loans for companies in hard-to-fund industries such as oil and gas, real estate and brokering. Texas Capital Bank also provides something called asset-based financing. Asset-based loans are collateralized by inventory, accounts receivable, or equipment and are a good option for businesses with cash flow troubles or seasonal sales cycles.
Since Texas Capital Bank is a traditional bank lender, they have stricter credit and qualification requirements than the nonprofits we mentioned above. Generally, banks require excellent credit and only extend loans to businesses with a couple years of operating history.

5. Texas Trust Credit Union

Many people overlook credit union business loans, but credit unions can provide members with affordable financing. In fact, credit unions often provide more competitive interest rates than banks and a more flexible loan underwriting process. In order to get a loan from Texas Trust Credit Union, you must first become a member. If you live in or your business is located in Dallas, Denton, Ellis, Henderson, Johnson, Tarrant, or Tom Green county, you’re eligible to become a Texas Trust Credit Union member (other credit unions exist in other parts of the state).
Texas Trust Credit Union provides SBA loans, term loans, lines of credit, real estate loans and construction financing. This credit union is an especially good choice for local developers and real estate investors because you can borrow up to 80% of the costs of new construction and you pay interest-only payments during the construction phase. You can also apply for a cash-back business credit card through this credit union to help you make ongoing business purchases. Find a branch near you to get started.

Texas small business grants

Business loans provide essential access to capital for small business owners, but they are not the only option. Texas businesses can also access funding through small business grants. The difference between business grants and business loans is that grants don’t need to be paid back, whereas loans must be paid back with interest.
Here are three business grants, which are open exclusively to small business owners in Texas:

1. Texas Department of Agriculture grants

The Texas Department of Agriculture operates several business grant programs and you don’t need to work in the farm industry to qualify. For example, the department offers grants to companies involved with designing specialty crops that enhance food safety or nutrition. There are also grants for businesses that develop nutrition education programs for children.

2. Texas Workforce Commission Skills for Small Business grants

Through the Texas Workforce Commission (TWC), businesses can access grants to cover the costs of training their employees. You’ll work with a local college or university to select which courses you’d like your staff to take and TWC will provide funding to cover the costs of those courses. You’ll be covered for up to $1,800 for each newly hired employee and $900 for employees who’ve been at your company for more than one year. The training courses must focus on one or more of the target industries selected by the Texas governor, most of which are in the areas of science and technology.

3. Texas Enterprise Fund grants

Another resource, the Texas Enterprise Fund (TEF) provides grants for businesses that choose to set up shop in Texas when Texas is competing with other out-of-state sites. These “deal-closing” grants are more common with larger companies, national franchises, or shopping centers that are bidding on cities. Your business must create at least 75 full-time local jobs (if in an urban area) or 25 full-time local jobs (if in a rural area) to be eligible for a TEF grant. Grant sizes are tied to employee payroll.

National small business loan options for Texas small businesses

Beyond Texas-based small business loans, there are also several nationwide loan options for Texas business owners. Online lenders in particular make it easy to find financing for your business with just a few clicks on your computer. The eligibility requirements are generally pretty easy and funds can land in your bank account within a few days. Online lenders are more expensive than banks and nonprofit lenders, but they are a good option if you need capital fast or if you’ve been rejected by other lenders.
Here are some of the best online lenders for Texas small businesses:

1. Fundbox

Fundbox is an online financial company that provides flexible, short-term lines of credit for small businesses. Compared to other online lenders, Fundbox has the easiest qualification requirements. You need to have just two months of operating history under your belt and average annual revenue of $50,000. One thing that sets apart Fundbox is that they don’t have a minimum credit score, so this is a good option for Texas startups or Texas business owners with bad credit.
Applying to Fundbox is super simple. Just sync your business checking account or accounting software to Fundbox’s application and they’ll evaluate you for loan approval. Loan amounts go up to $100,000 and you repay the funds in 12 to 24 weeks.

2. OnDeck

OnDeck is another online lender that provides small business loans and lines of credit. They work with businesses that have been operating for at least one year, earn $100,000 in annual revenue and whose owners have a credit score of
or higher. One advantage of working with OnDeck is access to larger loan amounts and slightly longer repayment terms. OnDeck loans go up to $250,000 and you pay back the loan in up to 24 months. Online lenders like OnDeck are significantly more expensive than bank and nonprofit lenders, but they provide speed and convenience. In fact, funds can be in your account as soon as the next business day after you apply.

3. Funding Circle

If you’re interested in an SBA loan or bank loan but need funds right away, consider a medium-term online lender like Funding Circle. Funding Circle offers $25,000 to $500,000 in funding and you have to repay the loan within seven years. This lender more closely mimics an SBA loan or bank loan in terms of cost, but the application process is much easier, with funds available in less than a week. You do need to have stronger credentials to qualify. Your credit score must be at least
and your business must have been operating for two years or more.

Other resources for Texas small businesses

Financial assistance is vital for new businesses, but entrepreneurs also benefit from access to coaching, mentorship and networking with other business owners. Texas small businesses can access needed resources through the following organizations:

1. Local Texas Chamber of Commerce

Every major city in Texas has a local chamber of commerce. These chambers often hold networking events, conferences and training workshops for local businesses. Some chambers of commerce also have connections with local universities which you can utilize for your hiring efforts.

2. Local Texas SCORE Chapter

The Service Corps of Retired Executives (SCORE) helps small businesses get off the ground through education and mentorship. SCORE will match you to a business mentor in your industry who is located near you. These mentors can help you form a business plan, connect you with accounting or legal help, assist with supply chain management and much more. SCORE often hosts free webinars as well that you can watch on the go.

3. Local Texas Small Business Development Center

Another great resource is your local Small Business Development Center (SBDC). SBDCs provide free, one-on-one business consulting services with industry experts that can help you make better business decisions. In-person and online seminars are also available for an additional cost.

Putting your business loan application together

When you’re ready to apply for your Texas small business loan, you’ll need to have a few items ready to go in your business loan application. Documentation requirements vary significantly according to which loan or grant you apply for, but here are a few things you should pay attention to:

1. Business plan

No matter what type of financial assistance you apply for, a business plan is critical. The business plan contains a detailed overview of your business’s product or service, target customer base, local and national competitors and financial projections. Lenders and grant organizations will use your business plan to evaluate your business’s future growth potential and the amount of funding for which you’re eligible. The organizations mentioned above under “Resources” can help you put together a business plan.

2. Credit score

Depending on the lender you apply with, your credit score could be an important factor in qualifying for a business loan. Banks place high importance on credit score and even nonprofits consider a business owner’s credit history carefully. To improve your credit and keep it in top shape, regularly monitor your credit score, fix errors in your credit report and pay all existing debts on time. Improving your credit score is possible, but it won’t happen overnight, so take a look at where your credit stands well before you begin your search for financing.

3. Business revenues

Never lose sight of maximizing business revenue, even when you’re first starting out. Lenders are more likely to extend money to businesses that have a market-viable product and a solid customer base--and the sooner you can achieve that status, the more resources will be available to you. While startup business loans are available, it’s far easier to get a loan for an established revenue-generating business.

Texas business loans: The bottom line

Texas business loans are available from a wide network of banks and nonprofit lenders. Many community banks and nonprofits specialize in lending only to business owners who operate in Texas. However, if you’re unable to get funding through a local Texas lender, then widen your search to a national online lender. It’s easy to apply for financing with an online lender and you can often have the funds in your bank account in just a few days. Whatever your source of funding, there are plenty of opportunities for small business owners in Texas.
This article originally appeared on Fundera, a subsidiary of NerdWallet.