Entrepreneurs starting their own business must raise capital to make their dream a reality. There are a number of avenues available to help provide these funds, and it is wise to have a basic understanding of all your options before taking out a business loan.
Are there opportunities for entrepreneurs that are unique to Texas?
Texas offers a number of incentives for entrepreneurs. The state’s Governor’s Office Small Business division outlines some of the many partners that may be of assistance for those looking for funding, including the Texas Enterprise Fund. This fund provides a cash grant that is designed to provide incentive for entrepreneurs to do business in Texas.
The state also provides various tax exemptions, including sales, use and franchise exemptions in certain situations.
What other options should entrepreneurs consider?
In addition, the United States Small Business Administration (SBA) offers a variety of options, including the general small business loan, also known as the 7(a) loan, and microloan programs.
The 7(a) loan program is the most commonly used of those offered by the SBA. In order to be eligible for this program, the business must meet certain criteria. Examples include:
- Meet the SBA’s size standards for a “small business.”
- Operate for a profit.
- Use the funds for a “sound business purpose.”
It is important to note that the SBA generally requires that the business have made use of alternative financial resources, including personal assets, before financial assistance through the SBA is sought.
In contrast, the microloan can provide funds to serve as the working capital for the business. These loans generally require the use of collateral as well as the personal guarantee of the business owner.
Entrepreneurs should also gather rates and terms from various commercial lenders to take into consideration before determining the best option for their business interests.
Whether looking at a state supported loan option or another lender, it is wise to seek legal counsel to help better ensure the transaction is structured to optimize your business interests.