Raising cash to survive the economic fallout caused by the pandemic has been a top priority for businesses since the March lockdowns, as companies were forced to shut down their establishments to contain the spread of the virus.
The Federal Reserve’s decision to lower the federal funds rate to zero has helped in reducing the cost of borrowing for businesses across the United States and certain initiatives like the Paycheck Protection Program (PPP), the Economic Injury Disaster Loan (EIDL), and other forms of small business loans available have helped the state’s entrepreneurs in remaining afloat during the downturn.
However, the application and approval process can, in some cases, take longer than expected given the high demand and the limited capacity that banks have to process applications, which complicates things a bit for companies within the state.
Additionally, prior to the pandemic, small businesses in Texas already struggled to get the financing they need, as indicated by the Small Business Credit Survey of 2019 – conducted by the Federal Reserve Bank of Dallas – which showed that 58% of the firms that were part of the study said they did not obtain the total amount they applied for from local institutions.
Given the urgency from companies to receive this funds, the following article provides a few tips that could accelerate the process of obtaining small business loans in Texas.
Tip #1 – Check the criteria for eligibility before applying
Knowing the minimum requirements that a particular lender has for approving small business loans in Texas can help you save time in the process of applying for one.
The specific conditions established by each lender usually vary from one provider to the other but most institutions require at least two years in business and a minimum annual revenue that could go from $35,000 per year to as much as $50,000.
Additionally, small business loans in Texas are usually granted based on the creditworthiness of the business owner, which means that a minimum credit score – normally higher than 500 or 600 – is often required.
Remember that each application you send could result in a hard credit inquiry on your report and accumulating too many of these over a short period can have a negative impact on your credit.
For that reason, avoid applying for loans that have a strict criterion that you or your business do not meet.
Tip #2 – Keep your financial records up to date
Bookkeeping is one of those things that business owners usually have no time to worry about, but it becomes important when it is time to look for external financing.
Consider hiring a part-time worker or a freelancer to help you with keeping your books up to date, or, if your company’s operation is not that complex, you could even pay for online bookkeeping software, which allows you to synchronize your bank account to facilitate the process of classifying your transactions.
It will be easier to pitch your situation to a lender if you can present up to date information about your business and this will expedite the process of getting a loan as well.
Tip #3 – Take a loan from a non-traditional lender
Non-traditional lenders are financial services providers that tend to have more flexible requirements when it comes to approving small business loans in Texas.
This is the case of fintech companies like Camino Financial, which offers small business loans in Texas at affordable rates with repayment periods ranging from 24 to 60 months depending on the candidate’s eligibility.
Tip #4 – Consider pledging an asset as collateral
Secured loans tend to have more flexible credit terms, lower interest rates, and are usually approved faster as the lender has an asset to fall back on in case the loan is not repaid as agreed.
With that in mind, another alternative to speed up the process of getting small business loans in Texas involves applying for a collateralized loan like a title loan.
Among the alternatives, you can pledge equipment, machinery, vehicles, buildings, and other similar assets that you or your small business currently owns to get approved quickly.
Make the best decision for you
The challenging economic conditions that businesses in Texas have had to endure this year have increased their reliance on small business loans to survive the downturn. In this context, we hope these tips can help you in streamlining the process of obtaining one so your business can live on to see brighter days.
If you’ve never received outer financing, it’s understandable to have doubts, you just need to find the best option for you, find a lender that truly cares about your business and its success and follow your instinct.