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Austin Business Loans: Funding for Austin Small Businesses

Austin Business Funding

Austin, Texas is the fastest growing city in the United States with a vibrant and diverse economy. Crowned the number one place to live in the states, it is also one of the top cities for business. Thus, Austin is considered to be a major center for space, clean, and creative and digital media technology, and data management. Austin companies can additionally be seen emerging into the biotechnology and pharmaceutical industry’s. Now is an exciting time to do business in Austin, with affordable living, diversity, and a business environment that is dedicated to supporting, unique and independent companies Austin, Texas has a lot to offer.

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Therefore, Austin’s technology industry is thriving for many reasons. Due to its thousands of graduates each year from the computer science and engineering programs at the University of Texas at Austin, it provides the city a steady source of employees ready to contribute to the technology sectors. On top of that Austin has established high-tech companies such as Google, eBay, Samsung Group, Amazon, and Xerox to name a few with branches there. Some reasons why Austin has become a great place for technology is for its lower cost of living and doing business, combined with smaller size are the reasons companies are attracted to it. Nowadays the Austin-based company Dell is not the only prominent company, but one that gave birth to an entire tech ecosystem in the city. Thus, close to 6,500 employers in the Austin metro area is in high tech industries, and their tech industries total over 14.1% of all jobs, compared to 7.0% nationally. Austin’s tech companies are also very concentrated in high tech trade. Research has shown that it has over five times the national concentration of jobs in this group and has 13 times the national level of employment in computer and software merchant wholesaling. Moreover, the jobs rounding out the remainder of the high tech sector are Architectural engineering services, environmental consulting services, and medical and diagnostic laboratories. Altogether, Austin’s technology environment continues to flourish and expand every year with benefits tech companies in other states cannot deliver.

Another great industry under development in Austin is the emerging pharmaceutical and biotechnology hub. Ranked as the No.12 biotech and life science center in the United States, Austin is well on its way gaining even more recognition. Nearby developments in their biotech sector have to do with the world’s largest medical center; The Texas Center. It is expanding with a 28-acre TMC3 translational research campus that will bring together four of Texas’ most powerful institutions—the University of Texas, Texas A&M, University of Texas M.D. Anderson Cancer Center, and Baylor College of Medicine. Austin also has close to 200 life science companies, many of them putting down their roots within the last few years. However, the most exciting expansion has to be the Dell Medical School. Until now, Austin was lacking a medical school and not having a place to train physicians and clinical scientists. Now that all changed with its $295 million opening just a few years ago. So with the new influx of clinicians, local Austin startups now have a resource to help make their products relevant to health care. Lastly, the benefits of starting or working in a biotech business in Austin is the cheaper home base than San Francisco, San Diego, or Boston. There is no income tax in Austin, and Texas offers sales tax credits for some research and development expenses. Although Texas has some way to go before it can compete with San Francisco and Boston, their current rise is attributed to their academic institutions, investors, state support, infrastructure, and dynamic economy which they have to look forward too.

Conclusively, it must be noted that Austin’s business environment is concerned with supporting and keeping unique, local, and independent businesses up and running. Austin natives also have a long history vocalizing their resistance to projects that appear to harm the environment or threaten the natural and cultural landscapes. Additionally, they are reported as being the most active online bloggers out of any other U.S. metropolitan area expressing opinions and concern for rapid growth and irresponsible development and has been named the “Greenest City in America” by MSN. Hence, Austin’s business environment is friendly, supportive, eco-conscious and rapidly growing within the technology and medical fields.

Types of Austin Business Loans

Nearly every business will seek-out financing at one point or another — and this includes Austin small businesses. Common uses Austin small businesses have for loans include purchasing property, refinancing real estate, expansion, refinancing and consolidating debt as well as general working capital. Below we will take a look at some of the financing options available for Austin companies.

Bank Loans

There are plenty of loan options for Austin businesses, but none are as cost-effective as a conventional bank term loan. A bank term loan offers Austin businesses with the lowest rates and longest terms of all types of small business funding. While a bank term loan may be the cheapest, they are far from the easiest type of financing to qualify for. An Austin small business must show excellent revenue and profitability, as well as have fantastic credit.

Rates 5-15%
Terms 1-30 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs

 

Secured Line of Credit

A secured link of credit is another fantastic and affordable type of financing for Austin small businesses seeking funding. A line of credit allows Austin companies to have the ability to access financing whenever they need it without having to go through the approval process needed for a term loan. This type of financing is secured by the businesses assets (accounts receivable, inventory, real estate) and the funds are revolving.

Rates 5-15%
Terms 1-2 years
Funding Amounts $10,000-$5,000,000
Collateral A/R Required
Fees Medium costs

 

Unsecured Line of Credit

Unsecured lines of credit are similar to secured lines of credit, in that both are pre-approved forms of financing. The major difference between the two is that an unsecured line of credit doesn’t require an business collateral. Instead, a line of credit is almost solely based on the Austin business owner’s personal credit (which usually needs to be 680 or above to meet minimum requirements).

Rates 0% for 12 months
Terms 1-2 years
Funding Amounts $10,000-$500,000
Collateral Not be Required
Fees Medium costs

 

SBA Loans

SBA loans are another great option for an Austin small business seeking low-rate, long-term financing for their company. SBA loans are simply conventional business loans, but the key difference is that SBA loans are backed by the government. This means that if the Austin small business fails to fully-repay the loan, the U.S. Small Business Administration will cover most of the lender’s losses. By offering this guarantee the government hopes to encourage banks to offer more loans to small businesses.

Rates 5-8%
Terms 3-25 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs

 

Alternative Loans

Austin alternative business loans are a newer form of small business financing that looks to fill the gap between bank loans and high-interest cash advances. While an alternative loan doesn’t have rates as low as conventional bank financing, the rates are still very affordable and the terms are long enough to help the small business service the new debt comfortably. Additionally, while a conventional loan may take months to fund, an alternative business loan can fund in as little as a week.

Rates 5-15%
Terms 1-30 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs

 

Accounts Receivable Financing

Accounts receivable financing is a good form of financing for Austin small businesses that have plenty of unpaid accounts receivables and invoices and look to leverage those receivables into a line of credit. Rather than selling the receivables, the unpaid invoices are used as collateral for the line of credit, and the line is adjusted to reflect current and aging receivables.

Rates 0.5-2.5%
Terms 1-3 years
Funding Amounts $250,000-$10,000,000
Collateral Required
Fees Medium costs

 

Factoring

Factoring is very similar to accounts receivable financing. The key difference is that where A/R financing uses receivables as collateral, a factoring line is the sale of those unpaid invoices to an asset based lender or factoring company at a discount.

Rates 0.5-2.5%
Terms 1-10 years
Funding Amounts $10,000-$5,000,000
Collateral Required
Fees Medium costs

 

Equipment Financing

For Austin companies looking to obtain equipment for their companies, there are two options: purchase the equipment or lease it. To purchase the equipment you may seek to get approved with a loan. But another option would be to simply lease the business equipment. By leasing the equipment, the Austin business isn’t required to put down more than 10% of the costs, and will have the option to purchase the equipment at the end of the term.

Rates 5-15%
Terms 1-10 years
Funding Amounts $10,000-$5,000,000
Collateral Required
Fees Medium costs

 

Cash Advance

A cash advance for an Austin business is a good form of financing for businesses that need immediate financing, lack full business financial statements, or for Austin businesses with bad credit looking for funding. A cash advance isn’t a loan, but a financing tool in which the Austin business agrees to sell some of their future business receivables to a cash advance company in exchange for access to immediate cash.

Factor rates 1.10 – 1.50
Terms 3-24 months
Funding Amounts $5,000-$2,000,000
Collateral Not required
Fees Low to High costs

Summary

Austin small businesses have plenty of financing options at their disposal. The key is getting the type of financing that is the best fit for their needs and circumstances. If you are an Austin small business owner, and you’re considering obtaining financing for your company, feel free to reach-out to one of our financing specialists, and we’ll help you navigate the process.

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About the author
Domonique Cox

Domonique is a Minnesota native that earned her bachelors from The University of Arizona with a degree in English and Film Studies. Though books and writing are not her only interest, you can find her engaging in nutritional sciences, environmentalism, vegan cuisine, filmmaking, old school dancing, tennis, running, sound engineering, and enjoying satirical dark comedies or listening to the poetic lyrics of Bob Dylan. She is now based in Los Angeles as a content writer for GUD Capital where she spends her spare time honing her writing and directing skills. 

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GUD Capital is a nationally recognized leader in the financing industry for providing the best business lending solutions available to small and mid-sized businesses. We leverage our network of 4,000 competing commercial lenders to provide your business the largest selection of commercial financing options.

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