Resources

Summary

Need some capital for your business? Here is a look at some of the loan options available! The best tips to save money.

Funds are the way you turn a startup dream into a functioning business. In the Rio Grande Valley (RGV), you can expect to find entrepreneurial spirit and economic potential that drives the success of innumerable small businesses across the region. And that means you can find many funding options to fuel your own entrepreneurial dreams. Here is a look at where to secure this funding for yourself.

SBA Loan Programs for RGV Businesses

The first place to look for business loans is the U.S. Small Business Administration (SBA). Their array of loan programs for RGV-based businesses offers you access to capital that can help you found, or grow, your own company.

SBA 7(a) Loan Program

The SBA 7(a) loan program is one of the most in-demand loan programs offered by the SBA, in part because you can use its funds to cover many different business needs. Some of these include working capital, equipment purchase, and real estate buys. In the RGV, this program is particularly useful for businesses looking to expand or those in need of a large infusion of capital. You can borrow up to $5 million and can take up to 25 years to repay the loan.

SBA 504 Loan Program

For businesses interested in purchasing fixed assets like property or equipment, the SBA 504 loan program is a great choice. This program offers long-term, fixed-rate financing with lower down payments. The maximum loan amount is $5.5 million.

SBA Microloan Program

Not ready to borrow millions of dollars? The SBA Microloan program could be the right choice. This program offers loan amounts of up to $50,000, which you can use toward working capital, inventory, or supplies. This program is ideal for startups or other small businesses that just need a small infusion of capital to grow.

Short-Term vs. Long-Term Business Loans

Not only do you need to decide how much money to borrow, but you also need to decide how long to borrow the money for.

Short-Term Business Loans

Short-term business loans are designed to meet immediate financial needs, typically with a repayment period of one year or less. These loans deliver a quick infusion of capital for things such as purchases, seasonal expenses, or urgent issues. Just be aware of their higher interest rates and the rapid rate at which you must repay them.

Long-Term Business Loans

Long-term business loans, on the other hand, have extended repayment periods, usually ranging from 3 to 25 years. These loans work best when you want to make a large investment (e.g. A real estate purchase). You can expect to enjoy lower interest rates, but also a more complicated application process.

Collateral Requirements for Business Loans

Collateral is a critical aspect of securing business loans, especially when it comes to traditional lending institutions. It serves as a form of security for the lender, reassuring them that they can recover the money they loaned you in case you fail to pay back the loan.

Types of Collateral

• Real Estate: Property or land owned by the business
• Equipment: Machinery or technology central to business operations
• Inventory: Goods or raw materials
• Receivables: Outstanding invoices or accounts receivable

Before you apply for a loan, prepare a detailed record of the collateral you have to offer.

Business Line of Credit Options

A business line of credit allows your business to borrow funds as needed up to a pre-approved limit.

Revolving Line of Credit

A revolving line of credit allows businesses to borrow, repay, and borrow again, similar to a credit card. This type of credit line is ideal for ongoing operational needs and can help smooth out cash flow fluctuations.

Non-Revolving Line of Credit

A non-revolving line of credit gives your business a lump sum of money that you must repay over a set period of time. Once repaid, the credit line is closed, and you will have to apply for a new line of credit if you need more money.

Microloans for Startups in South Texas

Microloans are particularly beneficial for startups and small businesses in the RGV. These loans are designed to support new ventures with limited capital needs.

Benefits of Microloans

• Lower Qualification Requirements: Microloans often have less stringent qualification criteria, making them accessible for startups.
• Tailored Support: Many microloan programs offer additional support services, such as business coaching and mentoring.
• Quick Approval Process: Microloans generally have a faster approval process compared to traditional loans.
• Organizations such as the LiftFund and the Texas Women’s Foundation provide microloans specifically for businesses in South Texas. These resources can help startups overcome financial hurdles and achieve their growth objectives.

Securing business funding in the Rio Grande Valley involves exploring various options and understanding the specific requirements of each. From SBA loan programs to microloans for startups, there are numerous resources available to support businesses at different stages of their growth.

By carefully evaluating your needs and considering factors like loan type, collateral, and credit lines, you can make informed decisions that will set your business up for success. Let Greater State Bank know if we can help you secure a loan for your business!