Frost Bank Small Business Loans Review

frost bank small business loans

If you’re a Texan business owner, you may have heard of Frost Bank, or at least driven past one of their 130 branches or 1,200+ ATMs statewide. The San Antonio-based institution serves both consumers and businesses with a range of banking, insurance, investment, and loan products, all with an emphasis on tech-forward solutions. But for our purposes, we’ll focus on what entrepreneurs seeking business financing are likely the most curious about: Frost Bank small business loans.    

Frost Bank small business loans run the gamut from traditional business loans—like term loans and lines of credit—to specialized products for export and import businesses. Luckily, too, Frost Bank offers a good amount of information about their business loans on their website. You’ll still need to apply for your Frost Bank business loan in person, but this way, you can come to the table knowing exactly which type of Frost Bank business loan will work for you.

And if you find that you’re not yet in the market for a Frost Bank small business loan, or a bank loan in general (remember, bank loans are tough to qualify for), then we’ll show you the best alternatives from online lenders to consider, instead.

An Overview of Frost Bank Small Business Loans

Business Line of Credit

First up in Frost Bank’s array of business loans is their business line of credit product. Whether you get them through a bank or an alternative lender, lines of credit are among the most flexible forms of business financing out there. Like a business credit card, you can use your funds for virtually any business-related purpose, and you’ll only need to pay interest on the funds you use. And you can choose not to pull from your line of credit at all, if you don’t need to. Once you’ve paid off your debt, your line of credit will be replenished to its original amount.

In particular, Frost Bank offers variable-rate, collateralized lines of credit (secured by your business’s assets) for as little as $5,000. Frost Bank collects interest-only payments on a monthly basis, which you can manage online via Frost Online Banking.  

Term Loan

Business lines of credit are probably the most flexible form of business financing available—but term loans are a close second, as these lump-sum loans can be used for several purposes. As Frost Bank notes, you can use your term loan to open a new facility, purchase commercial vehicles or equipment, or any number of lender-approved, business-related projects.

But unlike a business line of credit, in which you’ll only pay interest on the funds you use, you’ll be responsible for paying both principal and interest on the entirety of your term loan (whether you use the funds or not). Frost Bank offers secured term loans with repayment terms between one and five years for equipment, or longer for real estate-related projects. The minimum amount they can lend for a term loan is $5,000.

Owner-Occupied Real Estate Loan

If your business occupies more than half of the building you currently need to renovate or refinance—or if you plan to occupy half of the facility you’d like to build or purchase—then you might do well with an owner-occupied real estate loan from Frost Bank. These loans carry fixed interest rates and, because of the scope of the projects they’re financing, some of the longest repayment periods on the market.  

Equipment Leasing and Finance

If you’re struggling to purchase the expensive equipment your business needs to keep its doors open—whether that equipment is a major fixed asset like heavy machinery, or as small as software and office furniture—then Frost Bank’s equipment leasing program might help you out.

Note that Frost Bank offers equipment leasing, which is different from an equipment loan. There are several equipment leasing structures, but generally the lessee owns the title to a piece of equipment, then rents it out to you for a flat monthly fee. Many equipment leasing deals offer the borrower the option to purchase the equipment at the end of their remittance schedule. As a major plus, you may be able to deduct your lease payments from your taxes as a business expense.

Frost Bank can offer up to 100% financing on new or used equipment, with a minimum loan amount of $50,000, structured as one of four equipment leasing options:

  • Capital lease: This program offers 100%, fixed-rate financing, with repayment terms lasting between two and 10 years, depending on the expected life of the equipment.
  • Tax lease: Payments are tax deductible, and at the end of your term you have the option of purchasing the equipment at its fair market value.
  • TRAC lease: This option is structured as a tax lease, but it’s designed specifically for commercial vehicles.  
  • Municipal lease: This option is available for government entities seeking equipment financing.

Export-Import Financing

One of Frost Bank’s more unique offerings is their Export-Import (EXIM) financing program, which is designed specifically to provide financing solutions for Texas-based companies that do business abroad. Frost Bank is uniquely positioned to provide these services, as the institution is a Delegated Authority Lender of the U.S. Export-Import Bank, an independent federal agency whose mission is “supporting American jobs by facilitating the export of U.S. goods and services.”

More specifically, Frost Bank can offer the following services to support Texas-based businesses that export their goods internationally:

  • General working capital financing
  • Up to 90% against a business’s foreign accounts receivable, or 75% against the business’s export-related inventory
  • Help Texas exporters lend directly to international buyers of U.S.-manufactured goods, by offering foreign buyers either a term loan or a line of credit to purchase American-made equipment and inventory.

For more information on the bank’s EXIM financing, you’ll need to contact a Frost Bank representative directly.

Letters of Credit

While Frost Bank’s EXIM financing programs can offer Texas-based exporters financial products, such as accounts receivable and working capital loans, their letters of credit can help protect both export and import companies when dealing with international clients.

Rather than a loan proper, a letter of credit is a bank guarantee, on behalf of an import business (the buyer), that the export business (the seller) will receive payment according to agreed-upon terms. In the event that the import business can’t meet these payment terms, then the bank itself will furnish the money to pay the seller properly. These financial instruments are crucial in protecting the interests of both the buyer and the seller and, more generally, legitimizes your business as a reputable player in the global market.         

SBA Loans

SBA loans are among the most coveted business loans on the market, as they carry long repayment terms, low interest rates, and high loan amounts. And since they’re guaranteed by the U.S. Small Business Administration—a federal agency charged with supporting the creation and growth of American small businesses—they pose a lower risk for the intermediary lenders that actually disburse SBA loan funds. What that means practically is that SBA loans may be more accessible to more borrowers than conventional bank loans are.

In fact, the SBA offers several loan programs to serve businesses that’ve been traditionally shut out of the lending space—including startups, certain nonprofits, businesses in low-income areas, and businesses owned by women, minorities, veterans, and other underrepresented entrepreneurs.

Depending on the type of SBA loan you secure, you can use your funds for several purposes, including general working capital, to purchase or renovate real estate, to acquire a business, to purchase equipment, and more.

The SBA loan application process is notoriously long and labor-intensive, as you’ll need to gather, complete, and submit a good amount of documentation. On the plus side, though, as an SBA Preferred Lender, Frost Bank can process SBA loan applications in-house, which will expedite the process considerably.         

Top Alternatives to Frost Bank Small Business Loans

If you find that a Frost Bank business loan won’t work for you right now, consider an alternative from one of the following, reputable lenders. What makes these loan options especially worth consideration are their less stringent qualification standards than banks’—so if you’re a younger business, have challenged credit, or even if you need access to funds quickly, then these or another alternative lender in Fundera’s network might be a better fit for you than a Frost Bank business loan.   

Fundation Term Loan/Line of Credit

Fundation is one of the best online alternatives to a conventional bank loan. This platform offers both term loans and lines of credit between $20,000 and $350,000 with repayment terms between one and four years—all of which looks pretty similar to what you’d find in a bank loan.

You’ll need to keep in mind, however, that potentially high interest rates are one of the downsides of working with an online lender. Fundation’s interest rates can be as low as 7.9%, or as high as 28.9%.

That said, Fundation loans are generally easier to qualify for than bank loans. To qualify for a Fundation loan of less than $200,000, you’ll need to meet the following minimum requirements:

  • $100,000 in annual revenue
  • 660 personal credit score
  • One year in business

If you’re seeking over $200,000 from Fundation, you’ll need to meet minimum requirements that are more aligned with those from a bank: at least $750,000 in annual revenue, 720 personal credit score, and five years in business.

Balboa Capital Equipment Leasing

Through Balboa Capital’s equipment financing program, business owners can access between $2,000 and $500,000 loans, with repayment terms between two and five years. Interest rates start at 3.99%, but they may reach up to 25%.

To be eligible for an equipment lease through Balboa Capital, you’ll need at least $100,000 in annual business revenue, 600+ personal credit score, and at least a year in business. And if you are approved for a Balboa Capital equipment lease, you can have access to your funds in as little as a single day.

Kabbage Line of Credit     

If you need access to cash ASAP or sooner—whether that’s to replace a burst pipe in your facility, or to fulfill an influx of orders after a successful business marketing campaign—then you likely don’t have the time to apply for a bank loan and wait for the underwriters to approve or deny your application.

In that case, you might be better off with a line of credit—which, as we mentioned, is a flexible form of financing—from a tech-forward platform that can give you a credit decision, and access to your funds, in as little as one day. Kabbage, an online lender, offers one of the best line of credit products in the alternative lending space, and a super quick turnaround time.

Kabbage can offer business owners lines of credit as small as $2,000 or as large as $250,000, with either a six- or 12-month repayment term. Interest rates range from 1.5% to 10% during the first two or four months of your loan, depending on your total repayment term, then sink to 1% for the remainder of your term.

To qualify for a Kabbage line of credit up to $100,000, you’ll need a minimum of $50,000 in annual revenue, 550 credit score, and a year in business. Borrowers seeking more than $100,000 will need stronger numbers and more experience in their industry.     

Is a Frost Bank Small Business Loan Right for You?

If you’re a Texas-based business owner—and well-positioned to fulfill a bank’s tough loan eligibility standards—then one of Frost Bank’s business loans might be an ideal financing option for you.

To apply for any of the Frost Bank small business loans we mentioned, you’ll need to print and complete the bank’s Business Banking Application, which you’ll then submit to your nearest Frost Bank branch. In addition to this nine-page application, you’ll need to bring the current and previous year’s tax returns for your company’s principals and/or business owners the following documents to your Frost Bank financial center.

You may need to bring additional documents with you, too, depending on the type and size of your loan. To be best prepared, gather together the following documentation:  

  • Your business’s key financial statements (such as bank statements) for the most recent two to three years
  • Your business’s recent accounts receivable and accounts payable
  • Personal financial statement
  • A written explanation of your intended use of your Frost Bank business loan

There’s no harm in applying for a Frost Bank loan, even if you’re not quite sure whether you can fulfill their qualification standards. And if you can’t, remember that you have alternative loan options available to you, many of which are designed to make credit products more accessible to more American business owners.

And you can’t go wrong by working with a loan specialist during this process, who can help you navigate both your bank and non-bank loan options, as well as help prepare and submit your loan application for you.

Founding Editor and VP at Fundera at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. 

Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.

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