Product Development and Small Business Incubator Fund

The Product Development and Small Business Incubator Fund (PDSBI) offers long-term, asset-backed loans to product development companies and small business incubators/accelerators located in Texas. The loans finance the development and production of new or improved products or the stimulations of new or existing small businesses in Texas. The program targets those businesses which may be unable to obtain full financing or financing on workable terms in traditional capital markets.

The Program consists of two separate Funds – Product Development and Small Business Incubator – outlined below:

All applicants must have 3 years of operating history to be eligible for a loan.

  PRODUCT DEVELOPMENT FUND SMALL BUSINESS INCUBATOR FUND
PURPOSE To aid in the development and production, including the commercialization, of new or improved products in the State of Texas. To foster and stimulate the development of new or existing small businesses in the State of Texas.
ELIGIBILITY

A new or improved product being developed, produced, and/or commercialized in the State of Texas, to include an invention, device, technique, or process, without regard to whether a patent has been or could be granted, that has advanced beyond the theoretical stage and has or is readily capable of having a commercial application.

Pure research is ineligible.

A small business, defined as a legal entity which is domiciled in the State of Texas or has at least 51% of its employees located in the state, employs fewer than 100 full-time employees, and is independently owned and operated.

Any business in the State of Texas is eligible if the business is substantially likely to develop and expand the opportunities for small businesses in the state (for example, small business incubators) in the preferred industries listed below.

FINANCING AVAILABLE Asset-backed loans
PRINCIPAL LIMITATIONS Based on staff & board discretion; generally range from $1 million - $5 million
INTEREST RATE Low variable IR
MAXIMUM TERM 15 years if financing personal property or working capital; 20 years for real property
SECURITY REQUIREMENT Unencumbered tangible assets including property, plant and equipment; generally, minimum 1:1 Orderly Liquidated Value to Loan Amount (first lien required)
GUARANTORS Third parties may serve as guarantors
USE OF FUNDS Capital purchases or working capital infusions
ADVANTAGES Flexible structure and terms, below-market interest rates
CREDIT COVENANTS
  1. At least 3 years of audited annual financial statements
  2. Max debt-to-equity ratio of 4:1 after incorporation of requested loan
  3. Min current ratio of 1:1 after incorporation of requested loan, AND
  4. Min debt service coverage factor of 1.2x after incorporation of requested loan
PREFERRED INDUSTRIES Semiconductor, nanotechnology, biotechnology, or biomedicine products or businesses with the greatest likelihood of commercial success, job creation and retention in the state.
*Other products and businesses are eligible for consideration if approved by OOG/EDF

Application Process

The Fund is administered by the Office of Economic Development Finance (EDF) under Economic Development & Tourism within the Office of the Governor. Policy-making responsibilities and final loan reviews (approval/denial) are carried out by a nine-person board appointed by the Governor (when applicable) and EDF staff. EDF staff remains in contact with the board regarding each individual application throughout the process, and staff maintains the authority to decline an application at any time.

The full application, review, and approval process for a successful applicant is as follows:

Download the PDSBI Progam Overview for more information and frequently asked questions.

Contact Us

Interested applicants may call our office at (512) 936-0100 or send us a message to discuss their project with staff.