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Texas Small Business Grants

There is an old saying, “you have to spend money to make money” and this holds true especially when you are starting a new business. There is a cost attached to starting any form or type of Texas business including home-based businesses. The initial cost for any startup could vary and you may find yourself over-shooting the predetermined budget. This is where Texas small business grants can provide the much needed financial relief. This article cum guide has been created to provide entrepreneurs with an insight into the Texas small business funding options available as well as other business incentive programs accessible in the state.

Doing Business in Texas

Doing business in Texas can bring growth and expansion for small and medium sized enterprises as it is one of the few states in the U.S with a strong economy and a pro-business climate. The real Gross Domestic Product (GDP) of Texas was $1.7 trillion U.S. dollars in 2020 and it is home to approximately 2.8 million small businesses. The state has been ranked #1 state in terms of exporting for 19 years in a row and #1 state in tech exporting for consecutive 7 years. Texas has reported a 60% increase in its export trade and the total output by businesses in June 2021 was $31.6 billion. The state is ranked amongst the top 5 in CNBC’s annual Top States for Business rankings while entrepreneurship has become the “Texas state of mind”.

Why do businesses prefer doing business in Texas?

Texas has become quite the favorite amongst first time business owners and entrepreneurs and this is owing to the numerous benefits the state offers including Texas small business grants. Texas has a vibrant economy and a robust infrastructure that supports and promotes business growth and expansion. If you plan on doing business in Texas then there are several factors and advantages that can help your business to achieve its mission, objectives, and profitability. Some of the factors are:

  • A Pro Business Tax Environment – One of the top reasons for doing business in Texas is the tax environment. The state has conservative tax policies along with streamlined regulations, which makes it ideal for starting a new business. Texas does not have any personal or corporate income tax and is considered to have a really low tax burden as compared to other states in the country. Texas small business incentives related to taxes is one big advantage like the sales tax exemption for manufacturing machinery and equipment and franchise tax exemption applicable for sellers, manufacturers, or even installers of different types of solar energy devices.
  • Business Innovation Platform – Texas is steadily moving forward towards a complete industry transformation as entrepreneurs doing business in Texas take advantage of the innovation and invention platform and environment. Some of the greatest industry-changing innovations have their origins deep rooted in the state and surprisingly, Texas has won more awards for a pro business climate and small business job growth than all of the 49 states combined. The state has innovation hubs, accelerator and Incubator programs, agencies that directly sponsor innovation and a host of Texas small business grants for entrepreneurs and startups.
  • Small Business Financing and Capital – Startups and small business owners often need funding in the initial phase of their business. The Texas small business grants program is one such avenue that creates funding opportunities for businesses based on size, industry, and location. There are non-profit lenders, Texas angel investors, United States Department of Agriculture (USDA) financial backing, incubator funds, Texas small business funding for women, and startup business loans among others.
  • Deep Talent Pools – One of the primary requirements of every new business is a skilled workforce and Texas has plenty of that. In fact, the state has a growing workforce experiencing more than 3% increase in its civilian work force. There are top tier universities in the state that keep adding to the talent pool each year. Some of the big names include University of Texas at Austin, Rice University, Texas A&M University, and University of Houston among others. There are several training programs and skill development funds for business employees and entrepreneurs as a part of Texas small business incentives program and Texas small business development programs.

Small Business Incentive Programs and Grants in Texas

When you start a new business in Texas, one of the beneficial aspects is that you will have access to a variety of Texas small business grants and incentive programs. Every business has an initial cost attached to their inception and this cost varies according to the type of business activity and setup. Some businesses like those started from home have lower initial costs but some businesses like retail stores or restaurants have higher initial startup costs. In order to manage costs, entrepreneurs can apply for loans through Texas small business funding programs and even participate in incentive programs that provide a variety of tax credits and other benefits to offset long-term operational costs.

Incentive Programs

Incentive programs are governed or administered by state agencies and the Federal government. Each state in the US offers different types of state incentives to help small businesses in achieving different objectives. For example, the Texas small business grants provide financial relief or funding to startups. Similarly, there are a host of incentive programs that are targeted at encouraging higher productivity and increasing employee retention rates among others. You can qualify for these incentive programs when you start doing business in Texas. Some of the top incentive programs in the state are:

Texas Enterprise Fund

The Texas Enterprise Fund (TEF) is a type of business incentive fund that awards Texas small business grants to business entities that are planning a new project like opening a new facility or expansion. Cash grants for each applicant are calculated based on a uniform analytical model. The analytical model takes into account several factors like:

  • Average wage of all new employees
  • Expected timeline of hiring
  • Number of jobs being created
  • Capital investment by the business
  • The business sector in which the company is active

The Texas small business funding or cash award through the Texas Enterprise Fund (TEF) can vary from $250,000 to $50,000,000 and even more.

Events Trust Fund

The Event Trust Funds (ETF) program is a Texas small business incentives program, which comprises of three different funds, which are:

  • The Events Trust Fund
  • Major Events Reimbursement Program
  • Motor Sports Racing Trust Fund

The primary objective of the ETF program is to attract a variety of events in Texas. The program is governed by the Texas Administrative Code, Title 10, Part 5, and Chapter 184.1 – 184.51. The amount of Texas small business funding through this program according to the funding database shows that it can vary from as low as $9,891 to $30, 61,727.08 and even more.

Texas Enterprise Zone Program

One of the top Texas small business incentives programs is the Enterprise Zone Program (EZP). This program is a type of sales and use tax refund program that has been specifically designed for encouraging private investment as well as job creation in some of the most economically distressed areas within the state. The refund is administered by the office of the Texas Comptroller and to qualify for this refund, your company should be situated within the Enterprise Zones. You can check the Enterprise Zone Map to identify the distressed counties or zones. As a part of the program, if you are doing business in Texas in the enterprise zone then it is important to know that the maximum allowable refund varies on the basis of capital investment and maximum number of jobs allocated.

For Example:: Your Company located in the Texas enterprise zone starts a “Half Enterprise Project” with capital investment varying from $40,000 to $5,000,000 and the maximum number of jobs allocated is 250. The maximum potential refund through this Texas small business incentives program will be $625,000 and the refund per job allocated would be $2,500.

Product Development and Small Business Incubator Fund

The Product Development and Small Business Incubator Fund (PDSBI) is a type of Texas small business grants program with the objective of providing asset-backed loans to small business incubators or accelerators and product development companies based in the state. The program consists of two separate funding programs, which are:

  • Product Development
  • Small Business Incubator

This type of Texas small business funding specializes in providing financial assistance for development and production of new as well as improved products. In order to be eligible for this program, a business should have a minimum of 3 years of operating history.

Skills Development Fund

The Skills Development Fund is an innovative Texas small business incentives program that has been created to assist the technical colleges and Texas public community to finance tailored job training courses for local businesses. This business incentive program is administered by the Texas Workforce Commission and the grant is provided to startups and companies. The maximum fund made available is $10 million and this Texas small business funding will allow businesses to address the training requirements of their existing and new workforce.

Are you planning to start a New Business in Texas?

Financing and Capital for Small Businesses

One of the primary requirements of new businesses is access to financing and capital and this is where Texas small business incentives programs can be quite helpful. There are two types of financing available in the majority of the states and they are business grants and the traditional funding options. The objective of both these types of financing options is to ensure small and medium sized enterprises, newly found corporations, and individuals running home-based businesses can fulfill their short-term and long-term business requirements. Let’s take a look at the different types of Texas small business funding sources available:

  • U.S. Small Business Administration – The U.S. Small Business Administration (SBA) has a presence in all the states including Texas. SBA offers loans as well as training to help small businesses with growth and expansion. They also provide Texas small business funding for crisis times also known as disaster loans. It is important to note that the agency will not be lending directly to a business owner but instead set guidelines for various loans and Texas small business grants made by community development organizations, partnering lenders, and various micro-lending institutions. SBA has offices in Dallas/Fort Worth, El Paso, Harlingen, Houston, Lubbock, and San Antonio. The loans offered by the agency for small businesses are 7(a) loans, 504 loans, and Microloans.
  • Texas Angel Investors – An angel investor is known by many names like a seed investor, private investor, or even angel funder. Although, they don’t specialize in Texas small business grants but assist small businesses and startups to funding and capital. Angel investors are high-net-worth individuals focusing on providing financial backing to small businesses, startups, or entrepreneurs. They provide Texas small business funding in exchange for ownership equity in a company and it can be a one-time investment or an ongoing injection of funds. The Texas angel network is divided into the following:

  • Non-Profit Lenders – There are different types of Texas small business funding loans and lenders including banks and credit unions. The non-profit lenders or non-profit micro lenders provide loans to those small businesses that may not qualify for any other type of loan. A non-profit lender would ideally focus on loans with amounts under $50,000. Some of these loans may be no-interest or even low-interest loans. Non-profit lenders in the state that you can apply for a loan while doing business in Texas include:

    • Community Development Financial Institutions (CDFIs)
    • PeopleFund
    • BCL of Texas
    • LiftFund
  • Texas Workforce Training Grants – The workforce training grants are administered by the Texas Workforce Commission (TWC). This is a Texas small business grants program that specializes in providing grants for small businesses. The primary objective of this type of Texas small business funding or grants is to ensure their employees can be inducted into various on-job training programs for skills enhancement. The training programs are provided through technical or community colleges as well as the Texas Engineering Extension Service (TEEX).
  • Federal Grants – Grants are financial awards that are administered by both federal and state government agencies. The top two Texas small business grants administered by federal agencies are the Small Business Innovative Research (SBIR) program and the Small Business Technology Transfer Funding (STTR) program. The SBIR and STTR grant programs are highly competitive Texas small business funding programs, which are aimed at encouraging small businesses to engage in Federal Research and Development(R&D) with the idea of promoting commercialization. The other objectives of these federal grants programs are to stimulate technological innovation and increase commercialization of innovation among others. There are three categories of federal grants and they are:

    • Project grants
    • Formula grants
    • Block grants

Ready to Start Business in Texas?

Every business needs a little financial assistance when it comes to establishing its operations and Texas small business incentives and grants play a key role in providing the much needed funding. If you are thinking of doing business in Texas then the first step is to register a business as you can apply for these grants and incentives only after new business formation or incorporation.

IncParadise, an expert incorporation service provider in Texas can help you start a business in Texas, so that you can benefit from the state incentive programs. We also provide additional services and can help you with all your annual filings like annual reports.

Form a Texas new business today!