10 Small Business Loans in California You Can Apply For
If you’re looking for a small business loan, California has plenty of options for you. But which funding package would be best for your business?
In this article, we cover:
11 financing options in California offering loan amounts of up to $5 million
How to spot scammers pretending to offer SBA loans
Two further financing options from Backd
10 Options for Small Business Loans in California
Other than business loans through banks and credit unions, there are 11 other loan options you could apply for to help meet your business need for financing in California.
1. SBA 504 Loan Program
The U.S. Small Business Administration operates a variety of different loan programs across the country. One of the most popular types of small business loans in California are SBA 504 loans.
With this type of loan, the SBA provides 50% of the amount you want to borrow. A private sector financial institution tops that up, providing 40%. It’s then up to you to find the remaining 10%, much like you have to provide a down payment when you apply for a mortgage.
You can use SBA 504 loans to fund the following:
Commercial real estate projects: Your business must occupy at least 51% of the space in the property post project completion.
Machinery and equipment purchases: Anything you buy for your business must have a working life of at least 10 years.
You must have revenues of less than $5 million a year and a tangible net worth of less than $15 million to be eligible for a loan. You have up to 25 years to repay the loan.
One of the purposes of an SBA 504 loan is economic and community development. In your business plan, you need to show how borrowing the money will create or keep jobs.
Previously, you needed to keep or create one job for every $75,000 guaranteed by the SBA, but as of May 11, 2023, this amount has been increased to $90,000. For small manufacturers and energy projects related to public policy, that figure is now $140,000 (up from $120,000).
To apply, contact your local certified development company. You can find a list of them at SBA.gov.
2. SBA 7(a) Loan Program
There are two types of SBA 7(a) loans, the small loan and the standard loan.
Terms for the standard 7(a) loan are:
You can borrow up to $5 million.
On loans above $25,000, your lender will want collateral from you to the “maximum extent possible.”
For small 7(a) loans, the terms are:
You can borrow up to $350,000.
On loans above $25,000, your lender will want the same amount of collateral as if you’d applied for a non-SBA loan with them.
On either type of loan, no collateral is required for amounts up to $25,000.
For real estate loans, the maximum repayment period is 25 years. For equipment, inventory loans, or working capital loans, the period is 10 years.
3. SBA Microloans
SBA microloans allow you to borrow up to $50,000 for up to six years. You need to have been in business for two full years before you submit your application.
You can’t use a microloan to refinance or purchase real estate — you need an SBA 504 loan for that. You can however use your loan to buy inventory, machinery and equipment, furniture, supplies, and for working capital.
The intermediary lender for an SBA microloan will likely require collateral. You also may need to sign a personal guarantee, meaning that you personally will be liable for repaying any outstanding balance in full if your business fails.
4. Valley Small Business Guaranteed Loans
Fresno First Bank provides small business loans in California, specifically in the Central Valley area, that have a state guarantee of up to $1 million.
The bank also provides SBA 7(a) loans, SBA 504 loans, and SBA Express loans.
5. California Small Business Loan Guarantee Program
The California Small Business Loan Guarantee Program offers loan guarantees for small businesses. This makes lending to you less risky for institutions like banks and credit unions. The program is operated by the iBank Small Business Finance Center in conjunction with seven Financial Development Corporations (FDCs).
You can borrow the money to pay for startup costs, business expansion, inventory purchases, construction projects, agricultural purposes, disaster relief, and export financing. You can also use it for working capital purposes.
You can borrow up to $5 million but the guarantees offered by the program only cover up to 80% of what you borrow. Each FDC has its own eligibility requirements, so check which offers you the most favorable before going ahead.
Repayment terms for the loans are often a minimum of seven years. Interest rates vary depending on the lender you work with.
Please note that iBank is sometimes referred to as the California Infrastructure and Economic Development Bank.
6. Accion Opportunity Fund
Accion Opportunity Fund is a non-profit organization offering small business loans ranging from $5,000 to $100,000. They offer borrowers affordable interest rates and flexible repayment terms.
The fund provides a personalized approach to lending. In contrast to traditional financial institutions, they take into account more than just credit scores. In addition to small business loans to California companies, they offer business coaching, mentoring, and a comprehensive business resource library to their borrowers.
7. California Capital Access Program for Small Business (CalCAP SB)
CalCAP SB incentivizes financial institutions (PFIs) to extend lending to California's small business owners. They do this by providing a safety net for lenders by making matching contributions to partner PFIs’ loan loss reserve accounts. This has helped thousands of California small businesses unlock access to term loans when their applications would otherwise have been denied.
Loans for most purposes and to most business sectors are available under CalCAP SB. Up to $5 million is available. Businesses in “severely affected communities” (such as those with high local unemployment, low-income communities, or those declared as emergency or disaster areas by the governor) may apply for more.
8. Jewish Free Loan Association (JFLA) Small Business Loans
The Jewish Free Loan Association offers interest-free small business loans to companies in California. They help everyone they can, regardless of race or religion. They also don’t charge fees or require you to make monthly repayments.
They do need to see evidence that you can repay the loan. To apply, you must have a credit score of 580 or higher. You must provide one guarantor whose credit is also in good standing to borrow up to $7,500. If you can provide two guarantors, the maximum amount you can borrow increases to $36,000.
9. Working Solutions
Working Solutions CDFI is an organization that offers small business loans ranging from $5,000 to $100,000 with fixed interest rates between 9% and 11%. They have no minimum revenue, no need for collateral, and no credit score requirements. They promise an easy application process for borrowers.
They specialize in financing for startup and early-stage businesses. The key to their service is the one-to-one business consulting they provide to help entrepreneurs succeed.
To be eligible for a loan, your business must be at least one year old and operate in their 19-county service area. They provide funding and support to U.S. citizens, permanent residents, and ITIN holders.
10. Accessity
Accessity offers term loans ranging from $300 to $100,000 for startups or growing businesses. They offer low interest rates, no prepayment penalties, and no application fees.
The organization specializes in funding women-owned, diverse-owned, veteran-owned, and food-and-beverage businesses.
Beware of SBA loan scammers operating in California
SBA loans help businesses out across the state from Sacramento and Los Angeles County to San Diego and San Francisco.
However, there are criminals active in California trying to steal money and data from business owners by pretending to offer SBA loans. If someone asks you very early on for your bank details or to pay a fee, they may not be who they say they are.
If you’re concerned, call the SBA's Office of Inspector General at 800-767-0385 or submit a complaint online or by mail.
Small business loan alternatives in California from Backd
You don’t have to restrict your search for a lender to the SBA or financial institutions in the state of California. Backd offers two more options: business lines of credit and working capital advances.
Borrow between $25,000 and $2 million with a working capital advance or between $50,000 and $750,000 with a business line of credit.
Apply in just three minutes today and you could get your financing as soon as tomorrow.
