Small business loans in Texas

Where to get business loans in Texas

Here are five places to start your search for a business loan in Texas.

Traditional banks

If you run an established business, traditional banks are a good place to look for financing. Most banks offer competitively priced business loans, lines of credit and credit cards, plus high-yield checking and savings accounts and merchant services — everything you need to run your business under one roof.

To qualify for a bank loan in Texas, you’ll typically need strong credit and business financials. Most large banks require a minimum personal credit score of 700, at least two years in business and $100,000 in annual revenue. Some types of bank loans may also require collateral, like real estate or equipment.

• Loans offered: SBA 7(a), Express and 504 loans, lines of credit, credit cards, term loans and equipment financing
• APR range: 5.50% and 10.50%+
• Loan amounts: $10,000 to $1,000,000
• Loan terms: 4 to 25 years
• Best for: Business acquisition, working capital, growth and expansion

Credit unions

If you prefer to work with a local lender that is member-owned, credit unions like Texas Trust Credit Union and Texas Bay Credit Union offer similar financing options and interest rates as big banks — but generally have more lenient eligibility criteria, making it easier to qualify.

Credit unions are a good choice if you have a minimum credit score of 640 and want to build a relationship to possibly secure larger loans or better rates down the road. Most offer business checking and savings accounts, merchant services and investment products to help manage your business.

• Loans offered: SBA 7(a), Express) and 504 loans, lines of credit, credit cards, term loans and equipment financing
• APR range: 5.50% and 10.50%+
• Loan amounts: $10,000 to $1,000,000
• Loan terms: 4 to 25 years
• Best for: Business acquisition, working capital, growth and expansion

Online lenders

If you have a lower credit score or have been in business for less than a year, you may have more luck with an online lender than with a bank or credit union. Many online lenders have national reach and offer business loans in Texas — some of which may only require a 560 credit score to qualify.

Online lenders are a good source for microloans, low or no-doc loans and short-term, quick turnaround funding — like invoice financing and merchant cash advances — but rates can run high with these options. Some also cater to bad credit borrowers and higher-risk industries like cannabis.

• Loans offered: Invoice factoring, invoice financing, merchant cash advances, SBA loans, lines of credit, credit cards, term loans and equipment financing
• APR range: 6.00% to 75.00%+
• Loan amounts: $5,000 to $500,000
• Loan terms: 6 months to 25 years
• Best for: Cash flow gaps, working capital and long-term financing

Peer-to-peer lenders

Peer-to-peer (P2P) business loans offered by lenders like Funding Circle and Kiva are another option you can look into if you have less-than-perfect credit. Funded by investors or individuals instead of commercial lenders, P2P loans are geared towards higher-risk borrowers — but rates can hit 36% APR, and you’ll likely pay an origination fee.

• Loans offered: Term loans
• APR range: 6.00% to 36.00%
• Loan amounts: $25,000 to $500,000
• Loan terms: 6 months to 7 years
• Best for: Working capital

To learn more about P2P loans and if it’s the right choice for your business, see our guide on P2P lending.

Community Development Financial Institutions

Community Development Financial Institutions (CDFIs) are nonprofit lenders that specialize in financing underserved communities and businesses. If you’re located in a low-income or rural area in Texas or are a female entrepreneur or a member of a historically disadvantaged group, it’s worth looking into a loan from a CDFI.

CDFIs offer competitive interest rates, plus benefits like training, mentoring and workshops. Some nonprofit lenders in Texas include Business and Community Lenders (BCL) of Texas, LiftFund and PeopleFund, which are covered below. For more options, see this list of CFDIs by state, including Texas.

Texas small business programs and grants

There are several state funding opportunities available in Texas, including grants.

Business and Community Lenders (BCL) of Texas

The BCL of Texas is a nonprofit organization that provides business loans and support for people of color, women, veterans and low- and moderate-income individuals and small business owners. In addition to its Dallas Small Business Diversity Fund, it offers business microloans, loans over $50,000 and the SBA 504 loan.

LiftFund

LiftFund is a nonprofit that provides small business loans for women, minorities and startups in Texas and other states. LiftFund partners with the SBA and other institutions to provide loans for commercial real estate purchases, equipment, inventory, supplies, vehicles and working capital for business owners. To learn more, visit the LiftFund website.

PeopleFund

The nonprofit lender, PeopleFund, offers a range of loan programs, interest rate discounts and education tools to underserved communities and low-income businesses. Loan products offered include the SBA 504 loan, the SBA Community Advantage loan, the SBA Microloan and flash funds up to $25,000. Their BIPOC Accelerator program also offers training for entrepreneurs of color.

The Texas Workforce Commission

The Texas Workforce Commission (TWC) offers the Skills for Small Business grant, which is aimed at businesses with fewer than 100 employees. It emphasizes training for new employees and pays up to $1,800 for each new employee and $900 for existing employees. Training must be provided by a public community or technical college or the Texas A&M Engineering Extension Service (TEEX).

Texas Enterprise Fund grants

The Texas Enterprise Fund (TEF) awards deal-closing grants to companies considering a new project in which one Texas site is competing with out-of-state sites. To qualify, your business must be projected to create at least 75 full-time jobs in urban areas or 25 full-time jobs in rural areas.

United States Department of Agriculture (USDA)

USDA has business programs that provide financial backing and assistance for business owners in rural areas. These programs provide capital, equipment, job training and entrepreneurial skills to help Texans start and grow their businesses. For more information, see the USDA website.

Federal grants

While not exclusive to Texas, federal grants are available for business owners, including the Small Business Innovative Research and Small Business Technology Transfer Funding. Visit the Grants.gov website for more information on the types of grants available.

Business loan eligibility requirements in Texas

While every lender is different, the eligibility requirements for getting a business loan in Texas generally include:

• US resident
• 18 years of age
• Minimum 2 years in business
• Minimum credit score of 640
• Specific revenue requirements

However, business loans come in many types, so these requirements do not apply to all loans. For example, online lenders may accept scores as low as 560 and less than one year in business for certain types of business loans.

Business loan rates and fees in Texas

APRs for business loans in Texas vary depending on the loan type and your creditworthiness. Here are some typical APRs by loan type.

How to get a business loan in Texas

Here are the steps to get a business loan in Texas.

1. Determine the type of loan or financing you need

Business loans come in many types. Choosing the right loan can help you get the lowest rates while maximizing your funds.

• Business term loan. Business term loans are longer-term loans — usually from four to 25 years — making them ideal for large one-time purchase or debt refinancing.
• Business line of credit. If you need a source of ongoing working capital that you can pay off as you go, consider a business line of credit.
• SBA loans. Small Business Administration (SBA) loans offer government-backed financing at competitive rates, but they’re best for established businesses.
• Equipment loan. If you just need to pay for equipment, an equipment loan could get you a better rate and keep your existing credit lines and loans available for other uses.
• Microloan. For startups and poor credit borrowers who need less than $50,000, a microloan or a personal loan from an online lender could be your best bet.
• Merchant cash advances. If you have bad credit or are new in business, merchant cash advances offer an advance on future sales — but fees can run high.
• Invoice factoring and financing. If you run a B2B business, invoice financing and factoring offer an advance on your unpaid invoices to help cover cash flow gaps.

2. Check your eligibility

Not every business owner qualifies for the same types of business loans, but knowing your eligibility beforehand can help improve your chances of approval.

Here’s what lenders typically look for:

• Credit score. Banks may require a personal credit score of 700, while online lenders may accept as low as 560 or lower on certain types of loans.
• Annual revenue. Banks may require you to have at least $100,000 in annual sales, but credit unions and online lenders may be more lenient.
• Time in business. Banks and credit unions want to see at least two years in business, but online lenders may consider less than one year.

3. Find the right lender

Once you know the type of business loan you need, review banks, credit unions, online lenders and other community programs to compare your options. If you’re still unsure where to start, you also can use a connection service like Lendio to help you find the right provider in Texas.

Texas business loan laws and regulations

According to FindLaw, interest rates in Texas are limited to 6% or 18% for interest rates on judgments. But in case you’re wondering why rates on credit cards, personal loans and commercial loans far exceed these limits, it’s because Texas interest rate laws provide an exception to these limits on business and commercial loans.

As always, carefully read your loan agreement to make sure you understand the rates, fees and penalties you could be on the hook for.

Other Texas resources for small businesses

If you’re a new business owner looking for coaching and networking opportunities in Texas, these organizations offer mentorship and support to entrepreneurs.

• Business Investment Growth Austin (BiGAustin). BiGAustin offers business loans, consulting and education across Texas. It’s also the home of Women’s BiZ Inc., which provides resources, training and workshops for woman-owned businesses.
• The Governor’s Office of Small Business Assistance. The office hosts webinars and in-person events to share information about resources for small businesses and entrepreneurs in Texas.
• TWC Skills for Small Business. This program pays for the design and implementation of customized job training programs for newly hired employees of small businesses in Texas.

Business loans by state