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California Small Business Loans

The most significant factor preventing entrepreneurs from turning a small business into a thriving company is the financial investment needed. This is especially true if the business is young and isn’t generating the expected revenue yet.

Written by Tetiana Sitiugina-Babiuk - Independent writer and content strategist, updated on 9/10/2021

At a glance California is home to an astounding 4.1 million of small business enterprises, which makes it the number one American state in terms of small businesses by count. The state’s average small business loan interest rate is between 3%and 7%, depending on the loan institution. 

Quick Overview of the Best California Small Business Loans

Institution

Type of Loans

Amounts granted

Term

Interest Rates

California Capital Access Program for Small Business

Credit loss reserve program and small business loans

Up to $5 Million

Minimum of three years

Depends on the lender

California Small Business Loan Guarantee Program

Loans and Guarantee Scheme

80% -95% up to $2.5 Million Guarantees. Up to $20 Million loans

Average of seven years

Depends on institution

Valley Economic Development Center Small Business Loans

Standard business loans, microenterprise loans, and VEDC microloans

$50,000 to $500,000, 

$2,500 to $50,000,


$500 to $2,500

Six months to five years

8%,


5%-7.75%,



8.5%

Accion Rapid Loans

Small business loans

$300 to $8,000

Up to three years

14% - 18%

Housing Authority SMART Funding Program/LA Community Development Commission

Small and Medium business loans

$25,000 to $1.5 Million

It depends on the loan amount

It depends on the loan term

Top Five California Small Business Loan Options Explained

1. California Capital Access Program for Small Business

The California Capital Access Program for Small Business, or CalCAP, presents a credit loss reserve program, which covers up to 100% of small business loans issued by eligible lenders within California. With this program, you may apply for a small business loan of up to $5 million. However, specific borrowers applying under this initiative would be limited to $2.5 million in enrolled capital over three years.

To be considered for the CalCAP scheme, your main company must be located in the state of California. You should also make sure that at least 51 percent of your business revenue, profits, payroll, or workers is located within the state. You can use this loan for various purposes, such as infrastructure acquisitions, operational capital, product purchases, or even startup costs.

2. California Small Business Loan Guarantee Program

The Small Business Finance Center established by the California government works in collaboration with seven Financial Development Corporations (FDCs) to offer the Loan Guarantee Program to small businesses. Under the program, the Small Business Finance Center grants between 80% and 95% of FDCs’ small business loans.

To be eligible for participation in the Guarantee Program, you must own and manage a small company in California, employing one to 750 staff members. Small business loans available can range up to $20 million, but with guarantees of only up to $2.5 million. These loans have a median maturity period of seven years, but may be longer. Finally, the corresponding interest rate can vary, depending on which direct lender provides you with a loan.

3. Valley Economic Development Center Small Business Loans

The Valley Economic Development Center, or VEDIC, is a large non-profit business development corporation located in the Los Angeles Area. The three types of California small business loans offered by VEDC include standard business loans, VEDC microloans, and microenterprise loans.

  • Standard business loans. The standard loans offered by VEDC can vary between $50,000 and $500,000, with a maturity period anywhere between six months and five years. The origination fee is typically 2% to 3%, while the interest rates start at 8%.
  • VEDC microloans. These microloans are usually smaller in value, ranging between $2,500 and $50,000. Here, the maturity period can vary between 6 months and five years, while interest rates range from 5% to 7.75%. Finally, the origination fee can be anywhere between 3% and 5%.
  • Microenterprise loans. This is the smallest loan option offered by VEDC, with loan amounts varying from $500 to $2,500. The maturity periods run anywhere from six months to two years; interest rates start at 8.5%; and the associated origination costs range from $25 ro $50.

4. Accion Rapid Loans

While Accion provides small business loans nationwide, its Accion Rapid Loans are only available to California-based small businesses running in Riverside, Imperial, San Diego, and San Bernardino counties.

Accion Rapid Loans offer small business loans ranging from $300 to $8,000, with repayment periods of up to three years. The introductory interest rates are typically set between 14% and 18%, with an additional 1% discount for active-duty services personnel, their wives, and veterans.

The small business loans provided by Accion Rapid Loans are called "rapid" for a reason: the approval from Accion Rapid Loans will arrive in as little as three days. The application requirements include:

  • A registration
  • Proof of address
  • A business address
  • A year’s worth of business tax returns
  • A minimum credit score of 550

5. Housing Authority/LA Community Development Commission SMART Funding Program

The SMART Funding program is offered by the Los Angeles County Community Development Commission/Housing Authority with the goal of providing affordable business loans to existing small and medium businesses.

As such, small companies working within the medical, engineering, and transportation growth industries can apply for SMART Financing business loans that can range anywhere between $25,000 and $1.5 million. These California small business loans may be used for varying purposes, including product or infrastructure purchases, real estate acquisitions, leasehold renovations, operating capital, workforce retention, job creation, or even debt refinancing.

Top Online California Small Business Loan Options 

You should also consider online business loans alongside your other loan options. These are some of the options available to California small businesses. 

1. Fundbox - Best for Lines Of Credit

Fundbox offers two different types of loans. First of all, it provides all company owners with a line of credit. In addition, clients who have been with the company for a long time are eligible for term loans. 

You can apply for a Fundbox loan online and receive up to $150,000 right away. You will enjoy the simple and straightforward lending process, with top-notch customer service.

Fundbox Pros and Cons

Pros

Cons

  • Fast online application
  • Accepts lower credit scores
  • Receive up to $150,000 in pre-approved credit
  • Re-apply for new credit effortlessly
  • Rates can be expensive
  • Borrower qualifications can be hard to meet
  • Repayments are required frequently

2. Fundera - Best for Startup Loans 

Fundera specializes in the systems required to manage the revenue and expenses of your company, including accounting software, payment systems, and loans. The company works with multiple financial services to provide you with a one-stop-shop for financial assistance. As such, you will be able to choose from a variety of preferential rates based on your loan requirements to find what suits your business best.

Fundera Pros and Cons

Pros

Cons

  • Best rates for business loans
  • Various lenders available
  • Financial services and advice
  • Multiple integrations
  • Not a direct lender
  • Additional fees may apply to certain accounts
  • It can take up to three weeks to receive funding

3. BlueVine - Best for Invoice Factoring 

BlueVine provides invoice factoring to assist you in paying for immediate expenses like manufacturing costs. While the online loan process is incredibly fast and takes just 10 minutes to complete, the company provides a long-term solution to your financial needs. Once you've been accepted as a borrower, your profile will remain active, and you'll be able to request funding quickly by simply supplying the invoices you need to bridge.

BlueVine Pros and Cons

Pros

Cons

  • Speedy online applications
  • Receive answers within 24 hours
  • No surety needed
  • You can receive 85% - 90% of invoice value upfront
  • Your credit score does not affect it negatively
  • You can borrow up to $5,000,000
  • Short repayment terms
  • Interest rates can be expensive
  • Personal guarantee required
  • Line of credit has a draw fee
  • Services are only available for B2B (business-to-business) companies

Organizations Providing Support to California Small Businesses

Starting a small business is a truly life-changing experience. The good news is that California offers dozens of great resources that can help you get started and effectively grow your business. Below, you will find some of the top organizations that can provide valuable information and support for your company.

1. SCORE

SCORE presents the largest network for free small business mentorship and education throughout the United States. If you need assistance starting or growing your small business, you can benefit from numerous free services and resources offered by SCORE, including:

  • Confidential business mentoring with an industry professional
  • Online workshops and courses on topics like startup strategies, financial planning, and marketing
  • A rich library of online resources, including administrative templates and tools, checklists, videos, infographics, and more

2. Managed Career Services

Managed Career Services is a Los Angeles-based organization that provides valuable support to California small businesses through three major programs:

  • The MCS LA Business Source program helps business owners and entrepreneurs to build a business from the idea stage to a successful company.
  • Future Entrepreneurs in LA provides education and mentorship to young entrepreneurs to help them successfully launch a business.
  • Working LA is a creative workspace that houses startups, freelancers, and established businesses alike.

3. Latin Business Association

The Latin Business Association offers support for Latinos in the state of California in the form of networking, business planning, mentorship, and legal assistance. The organization holds regular events and conferences covering important topics like business networking or access to funding. 

However, keep in mind that the Latin Business Association provides its services only to businesses owned and operated by Latinos.

Other Resources for California Small Businesses

In addition to financial help and small business mentorship, California has numerous resources that can help you out along the way.

General Resources

News and Media Resources

  • The 100 Most Underrated Small Business Blogs​ is a comprehensive list of business blogs that focus on small businesses. This list compiles original and vital content.
  • Inc.com is an online magazine for entrepreneurs and small business owners.
  • The Wall Street Journal offers advice on starting a business, as well as databases of for-sale companies and venture capital. 
  • Entrepreneur.com is a magazine with ideas, articles, and resources for starting a business.
  • Inc. Magazine is a great resource for small business owners and entrepreneurs. Here, you can find in-depth social reports, the annual list of fastest-growing private companies in the United States, as well as daily news on tech, money, and management.

How to Apply for a Small Business Loan in California

There are a few small business loan requirements in California that you'll need to get ready to include in your application. The required documents can vary widely depending on the loan or grant you apply for, but there are a few things to bear in mind:

Business Plan

Having a thorough business plan prepared is absolutely essential when applying for a California small business loan. Sponsors and grant agencies will use your marketing strategy to measure your company's projected growth opportunities and the amount of financing you're eligible for. Therefore, you need to make sure that your plan includes a comprehensive description of the company's product or service, potential client base, local and national rivals, and financial forecasts.

Credit Score

Your credit score can play an important role in your ability to obtain a business loan. When applying for a loan with a bank, a good credit score is an absolute must, and even many charities tend to check the credit background of a company owner. Track your credit score daily, correct any mistakes on your credit report, and pay off all existing loans on schedule to boost and maintain your credit.

Business Revenues

Even when you are just getting started, have a viable plan for rising your sales and revenues. Lenders are most likely to lend money to firms with a marketable product and a large consumer base. So, the faster you reach that status, the faster you will have access to additional capital. Even though startup business loans are available, obtaining a loan for an existing revenue-generating business is considerably easier.

The Bottom Line

Now that you're done reading our guide to small business loans in California, it's time to make the next move. Small business loan opportunities in California are outstanding. On the other hand, much of them would necessitate a robust underwriting procedure and the qualifications to survive such scrutiny.

For those that aren't quite eligible, online business loans that finance California small companies are a viable choice. However, looking for local funds and funding online are not mutually exclusive. You should consider your options from national, statewide, and local sources before deciding which is best for your business.