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By GARY HENDERSON,Allegiance Bank

For Houston area small business owners, access to financial capital is one of the most important requirements for successful small business ownership. 

If you are not sure where to start, there are free or minimal cost resources available to assist small business owners and entrepreneurs seeking financial advice through the University of Houston Small Business Development Center (UHSBDC) or SCORE. 

The UHSBDC provides advisors, training and resources (such as business plan assistance) to help small business owners start or expand their business. SCORE consists of former business owners and professionals, who provide free counseling and mentoring for aspiring entrepreneurs and small business owners. Additional information on these services can be found at www.sbdc.uh.eduand www.houston.score.org.

Bank financing for the majority of small business owners consists of the following two types: 

Conventional Loans– Conventional bank financing is the most popular source of small business financing (working capital, equipment purchases, building purchases and real estate construction).  Banks vary as to how long a company needs to have been in business, how strong the owners credit profile needs to be, which industries that they lend to and terms offered. 

A conventional loan will typically need to be fully collateralized, requires a personal guaranty, may require an equity contribution of 20 percent or more and be on a term that matches the life of the asset(s) being financed.  Due to these requirements, a conventional repayment term may not be the most favorable to some small business owners. 

SBA Loans– Bank SBA financing is a form of financing supported by the U.S. Small Business Administration with a government guaranty between 50 percent to 85 percent.  An SBA loan provides financing not available through conventional or other sources to small businesses.  In exchange for the government guaranty, the bank is able to provide the financing with longer payment terms and a lower equity injection than required for a conventional loan.

Due to the SBA involvement, there is a fee that must be paid to the SBA for the guaranty, plus additional paperwork which adds time to the process.  SBA loans can be used for the same purposes as conventional loans, but can also finance business purchases, partner buyouts, franchises and some start-ups. 

For additional information, contact an Allegiance Bank loan officer at 281-894-3200. 

Gary Henderson is Executive Vice President and Chief SBA Officer with Allegiance Bank.