With the second-largest economy in the United States, Texas is becoming one of the most popular places for small businesses and startups.

Texas has 3.0 million small businesses registered in the state. With the attractive tax breaks, we believe this number is likely to keep rising.

If you’re hoping to start a business in Texas, there are numerous loan options and other resources available for you.

To help you navigate getting a small business loan in the Lone Star State, this article covers:

  • How much does it cost to start a business in Texas?
  • What small business loans are available in Texas?
  • Why you need a small business plan before starting a business in Texas

How Much Does It Cost to Start a Business in Texas?

texas starting a business
Source: Fwweekly.com

The fees for starting a business in Texas vary based on the type of business you want to start. The first step to starting your small business is registering with the Texas Secretary of State’s office.

How to Register Your Business in Texas

Before registering your business, you must ensure you have chosen an available business name and decided on your business structure. Your filing fees are determined by your business structure. If you’re unsure which structure is best for your business, you should hire a financial advisor to help you decide which one is right for you.

Here are some of the most common business structures in Texas and their filing fees:

  • Sole proprietorship: $300
  • Limited liability company (LLC): $300
  • Corporation: $300
  • General partnership: $300
  • Limited partnership: $750
  • Nonprofit corporation: $25

Common Costs for Small Businesses

Most common startup expenses include:

  • Insurance
  • License or permit fees
  • Rent
  • Office furniture
  • Payroll
  • Web design and web hosting
  • Advertising and marketing
  • Taxes

The cost of registering a business in Texas ranges from anywhere between $25 to $750, depending on your business entity. Add to that your fixed and variable costs.

What Small Business Loans Are Available in Texas?

business loan
Source: Forbes.com
  • Business and Community Lenders of Texas
  • Business Investment Growth Austin Microloans
  • PeopleFund
  • Texas Capital Bank Small Business Loans
  • Texas Trust Credit Union
  • Small Business Grants

The costs of starting and running a business may seem endless, but don’t let this discourage you. Texas offers several options for small business financing, which can help you ensure you have enough cash flow.

You can get loans from both banks and nonprofit lenders. A good starting point is contacting the Texas Governor’s Office to find out about industry-specific opportunities for your business.

Business and Community Lenders of Texas

Business and Community Lenders (BCL) of Texas is a nonprofit that aids in community development and extends loans to small businesses across the state. Their loan programs include:

  • Rural business lending: BCL, in collaboration with the U.S. Department of Agriculture, provides funding of up to $250,000 for businesses in rural communities with fewer than 50,000 people.
  • Business growth fund: BCL provides loans between $50,000 and $300,000 for businesses that are older than two years.
  • New business lending: BCL also gives loans to newer businesses for real estate, equipment, and inventory. These loans range from $20,000 to $50,000.
  • Small Business Administration (SBA) loans: In collaboration with the SBA, BCL finances SBA 504 loans of up to $5 million for business essentials and fixed assets.
  • Small and diverse growth fund: BCL provides microfinancing up to $50,000 for minority entrepreneurs and women in Texas.

Each loan program has different eligibility requirements. You can read about them on the BCL of Texas website.

This is a reliable option for startups, especially since BCL of Texas is known for working with businesses younger than two years old. Additionally, these loan programs include business coaching that extends through the loan duration. We recommend filling out BCL’s online questionnaire to get started.

Business Investment Growth Austin Microloans

Business Investment Growth Austin (BiGAustin) is a microlender that extends loans to numerous communities throughout the state. BiGAustin has a simple application process, and they get back to you with a decision within four weeks.

The basic eligibility criterion for business owners is:

  • Must be at least 21 years old and a U.S. citizen/legal permanent resident
  • Must have a stake of at least 51% in the business
  • Cannot afford/qualify for a conventional bank loan
  • Must provide a written business plan
  • Must be paying federal, state, county, and municipal taxes
  • Must have auto insurance and general liability insurance
  • Must have a secondary income stream outside the business, such as a second job, spouse, or savings
  • Must not be in active bankruptcy

The criterion for the business is:

  • Must be for-profit
  • Must be located in one of the following counties: Bastrop, Bell, Blanco, Burnet, Gillespie, Hays, Lampasas, Lee, Llano, Mason, McCulloch, Milam, San Saba, Travis, or Williamson

The longer the business has been operational, the greater the access to funding. With three months of operating history startups can access $15,000. Businesses that have been operational for a year can access $50,000. The repayment window lasts between one and six years.

PeopleFund

PeopleFund is a nonprofit lender in Texas. They focus on financing underserved communities, such as low-income groups, women, veterans, and people of color. Some of the benefits of securing a loan from PeopleFund are:

  • Business training (one-on-one and group)
  • Low down payment
  • No payment penalties
  • Customizable underwriting and collateral requirements

PeopleFund also participates in SBA loan programs, providing loans up to $350,000. While they offer discounts to underserved groups, their interest rates typically lie between 7% and 15%, and their maximum repayment period is seven years. They also extend disaster loans to businesses impacted by natural disasters.

PeopleFund has many physical branches across Texas, but the quickest way to get started is by filling in the online form.

Texas Capital Bank Small Business Loans

If you’re in need of larger funding, you should apply for a loan with Texas Capital Bank. They have branches located across Texas’s major cities and offer financing up to $750,000.

The bank offers lines of credit, equipment financing, term loans, SBA loans, and trade finance. Moreover, they extend loans in industries that are traditionally difficult to fund, such as brokering, oil and gas, and real estate. They also provide asset-based loans.

The collateral for such loans is inventory, equipment, or accounts receivable, making them an excellent option if your business is facing issues with cash flow.

Texas Capital Bank is a conventional bank lender, possessing strict credit and qualification requirements compared to nonprofit lenders. So, it’s safe to assume they’re more likely to provide loans to businesses with excellent credit and experience.

Texas Trust Credit Union

Credit unions’ interest rates are generally more competitive than banks and include flexible underwriting, so they can provide you with affordable financing. However, if you want to secure a Texas Trust Credit Union loan, you must first become a member. You or your business also need to be based out of Dallas, Denton, Ellis, Henderson, Johnson, Tarrant, or Tom Green counties.

Texas Trust Credit Union extends lines of credit, real estate loans, SBA loans, construction financing, and term loans. It’s an excellent option for real estate investors and local developers as they can borrow up to 80% of construction costs, paying interest only while construction is ongoing. You can get started any time by visiting a branch near you.

Small Business Grants

Loans aren’t the only option available. Business grants are a convenient alternative to raising capital for your business needs and, unlike loans, don’t have to be repaid. Here are three small business grants in Texas you can look into:

Why Do You Need a Small Business Plan Before Starting a Business in Texas?

write a business plan
Source: Thehartford.com

Many small business owners often avoid creating a business plan as it seems complicated and time-consuming. However, a business plan is essentially just a blueprint of your business goals and objectives and the steps you’ll take to achieve them.

It’s helpful for you to get a clear understanding of every aspect of your business, but more importantly, it’s an important tool for successfully securing business loans. Lenders want to check your business plan for profitability, returns, and evidence that you can repay loans on time.

Presenting a thorough plan also makes a great first impression. It shows lenders that you’re competent, professional, and determined to grow your business. This goes a long way in getting a loan approved.

Key Details to Include in Your Business Plan

  1. Executive summary: An overview of the key points presented in the plan, with an emphasis on how your business is successful in serving the target market.
  2. Company description: A writeup that helps the reader understand your unique selling proposition (USP).
  3. Market analysis: Research and evaluations regarding the industry, competitors, and target customers.
  4. Management & organization: Details highlighting your business structure and strengths of the management team.
  5. Service/product line: An explanation of your service or product and how it helps consumers.
  6. Marketing & sales: An explanation of how you want to build awareness of your brand and generate sales.
  7. Funding requests: A writeup of what you plan to use the loan for. It should be as specific as possible.
  8. Cash flow projections: A look at your projected revenue and expenses.
  9. Appendix: Supporting documents, such as letters of recommendation, research, business licenses, and credit history.

What to Do Next

Apart from the companies mentioned above, many community banks and local nonprofits also specialize in lending to Texas-based startups.

The recommendations in this article can help you in starting your business and obtaining financial help. However, it’s important to do your own research and create a solid business plan to ease the process and help you secure the right funding.