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California Small Business Loans: Top 2024 Funding Programs for Growth
Last updated: September 2, 2024
By: Market Shepherd Team
Reliable guidance
Securing a small business loan can be a challenging task, but for entrepreneurs in California, the process can be a bit more streamlined. The Golden State is renowned for its strong support of small business growth, providing a wide range of financing options and resources.
According to the 2022 Small Business Profile by the U.S. Small Business Administration Office of Advocacy, over 98% of businesses in California are classified as small businesses. In 2020 alone, banks issued $14.8 billion in small business loans to California companies with revenues of $1 million or less.
Why California is a Great Place for Small Business Loans
California not only offers various loan programs but also has some of the strictest lending regulations in the country. The recent Senate Bill 1235 mandates that lenders adhere to stringent transparency rules, giving business owners better information and legal protection when exploring their financing options. This makes California an attractive place to secure a small business loan.
However, even with these advantages, obtaining a small business loan in California requires thorough planning and preparation. From understanding your financial needs to navigating the loan application process, there are several steps involved. This guide will help you explore the best loan options available and how to secure the funding you need to grow your business.
Top Small Business Loans in California
1. California Small Business Loan Guarantee Program
The California Small Business Loan Guarantee Program is a valuable resource for businesses across the state. It provides loan guarantees for small businesses with up to 750 employees. This program is particularly beneficial for businesses that may not meet traditional lending criteria. One of the seven Financial Development Corporation (FDC) partners in the state can assist with technical support and processing these guarantees.
For newer businesses, the Jump Start Loan Microloan Program offers up to $10,000 in financing, particularly for underserved communities. This program is ideal for entrepreneurs who might not qualify for traditional loans due to being too new or too small.
2. California Capital Access Program for Small Business (CalCAP)
CalCAP is a loan loss reserve program that covers up to 100% of certain business loans, encouraging banks and financial institutions to lend to small businesses that have struggled to secure financing. To qualify, your business must be primarily based in California, with at least 51% of your employees or income coming from within the state. The funds can be used for various purposes, including startup costs, working capital, refinancing, inventory, equipment, and real estate purchases.
Regional Small Business Loans in California
3. Working Solutions
Working Solutions is a Community Development Financial Institution (CDFI) that provides loans to both startups and established businesses in the San Francisco Bay Area. They offer loans ranging from $5,000 to $50,000, with interest rates between 9% and 11% and terms of up to five years. They have no minimum credit score, revenue, or collateral requirements.
4. San Diego Commercial and Business Financing (SDCBF)
San Diego Commercial and Business Financing (SDCBF) focuses on commercial real estate financing but also offers small business loans for other needs, such as business acquisition, equipment, or furniture. They provide SBA 504(b) and 7(a) loans, as well as business lines of credit and accounts receivable loans.
5. Heritage Bank of Commerce
Heritage Bank of Commerce, based in Northern California, serves small businesses in and around San Jose. They offer a variety of loan products, including credit cards, lines of credit, and term loans, to meet both short-term financing needs and long-term growth projects like expansion or building renovations.
6. Los Angeles County Development Authority (LACDA)
The Los Angeles County Development Authority (LACDA) offers several loan programs designed to support small businesses in LA County. Their SMART Funding program targets industries such as manufacturing, clean technology, health, medical, and transportation development. The loans can be used for refinancing, real estate acquisition, inventory, working capital, equipment, and job creation.
7. Accion Opportunity Fund
Accion is a nationwide nonprofit lending network that focuses on supporting underserved entrepreneurs, including entrepreneurs of color, low-income entrepreneurs, and women. Their small business loans range from $5,000 to $100,000, and they provide additional resources like educational materials, coaching, and support networks. Accion also reinvests loan repayments into other small businesses, fostering community growth.
8. Los Angeles Federal Credit Union (LAFCU)
The Los Angeles Federal Credit Union (LAFCU) offers loans ranging from $20,000 to $5 million for businesses in the greater LA area. These loans can be used for expansion, advertising, equipment, inventory, and more. However, you need to be a member of the LAFCU, which requires you to live or work in the greater LA area.
The Challenges of Securing a Small Business Loan in California
Despite the variety of options, securing a small business loan in California can still be challenging. Traditional banks often view small businesses as higher-risk investments, preferring to lend to large corporations. For new business owners without a proven track record or strong revenue, qualifying for a bank loan can be particularly difficult.
Alternative Financing Options in California
Take National Business Capital and Lendio, for instance. They offer small business loans with competitive interest rates and terms of up to five years. You can even receive a decision within 24 hours of applying. National Business Capital is great for businesses with an annual revenue of $500,000 or more and Lendio is fantastic for businesses making less than that.
Exploring Government Grants for Small Businesses in California
In addition to loans, California’s state and local government organizations occasionally offer grants to small businesses. Programs like the Capital Infusion Program, run by the California Governor’s Office of Business and Economic Development, provide grant funding to the California Small Business Development Center Networks. To find other California-specific grants, visit the Economic Development Administration website or USA.gov for a list of available funding opportunities.
Conclusion
Navigating the world of small business loans in California can be complex, but with the right information and preparation, you can secure the funding your business needs. Whether through state programs, regional lenders, or alternative financing options, California offers numerous opportunities to help small businesses thrive.
By optimizing your loan search and considering all available options, you can find the financial support necessary to grow your business in one of the most dynamic states in the country.