The Golden State might not be the frontier anymore, but it’s brimming with opportunities for small businesses. Both passionate locals and eager-to-spend tourists give small businesses a well-deserved home in California. Despite ample opportunity, many entrepreneurs still find themselves searching for the best California business loans.

Even with the potential to thrive, businesses on the West Coast still need California business loans to take things to the next level. Thankfully, state regulations make this a more transparent and regulated process than other states. There are also many small business grants available.

Before settling for the first small business loan in California you come across, it’s important to know your options, along with some background information.

What You Need to Know About California Small Business Loans & Regulations

Aside from some of the best landscapes in the country, California is also home to transparency-focused regulations that help small businesses seeking funding.

Passed in October of 2018, Senate Bill 1235 was a major step forward for small businesses in need of California business loans. As far as loan agreement transparency goes, this bill makes California one of the best states for small businesses.

By passing this law, the California government laid down important ground rules about helping small business owners understand the technicalities of loan agreements before signing. In short, this bill helps entrepreneurs understand what the agreement obligates them to. This helps eliminate situations in which business owners learn new information about their agreement months into the process.

California Small Business Loan Guarantee Program

One of the most desirable business loans in California is offered through the California Small Business Loan Guarantee Program. Similar to SBA loans (which we’ll cover later), this state-run program helps lenders provide lower rates by guaranteeing 80-95% of the loan.

The Small Business Finance Center of California’s state government runs this program in conjunction with seven Financial Development Corporations. These non-profit organizations help drive small businesses by providing commercial loans in California, along with other resources.

Because the various FDCs facilitate these loans, each has different requirements for issuing guaranteed California business loans. Across all lenders, though, you can’t apply with more than 750 employees.

Through this program, you can qualify for funding up to $20 million. However, only up to $2.5 million can be guaranteed. Payment terms often start at 7 years but can be longer. Nonprofits may be eligible to qualify as well.

To learn if your small business qualifies, apply directly through an FDC.

Factors to Consider When Choosing a Small Business Loan

Many entrepreneurs hyperfocus on their interest rate when, in reality, there are many other factors to weigh into your decision. Here are a few of the most important considerations when selecting the best financing option for their businesses.

  • Lender Type: Banks and credit unions are very different from their non-bank counterparts. It’s best to apply with both types of lenders to understand the general terms you qualify for at each respective lender.
  • Type of Loan/Financing: You can choose from term loans, lines of credit, revenue-based financing, asset-based lending, and many other types of financing. Each structure has different benefits and drawbacks for specific situations, which you’ll need to consider before selecting one.
  • Repayment Term: Short-term repayments can seem overwhelming, while long-term schedules can compound your interest and raise your cost of capital. Selecting the right repayment term is key to maximizing the benefits of your financing.
  • Interest Rate: Of course, you don’t want to pay more than you have to. Some lenders, financing types, and repayment structures carry a higher cost than others, so you’ll need to assess your financial capabilities.
  • Economic Conditions: Applying for financing in a tightening economy will yield higher rates and less favorable terms. You’ll need to time your application correctly to get the “best” rate, but remember that revenue-driving opportunities should always be considered, regardless of the economic conditions surrounding your transaction.

It helps to have someone next to you who understands the most important aspects to focus on as you search for the right lender. At National Business Capital, we make this easy by matching a Business Finance Advisor to every client. They learn about you, your business, and your goals to ensure we’re able to find the most competitive options for your unique circumstances through our diverse lender network.

Typical Small Business Financing Options in California

Before getting bogged down by state-specific California business loans, you can also find great options through nationwide lenders.

Depending on your background, you may be able to qualify for specific programs as a female minority or even government options for women entrepreneurs.

Type of Financing Description
Small Business Loans (Term Loans) Small business loans, which may also be called working capital loans, have a straightforward structure. You receive a set amount of cash based on what you need and qualify for and pay it back over a certain period of time at a certain rate.

When you borrow through a private lender (as opposed to an SBA loan), there are little to no restrictions on funding usage. You can put your cash toward anything that helps your business, including inventory, marketing, expansion, and more. Small business loans can also help you solve challenges.

Business Lines of Credit If you need flexible small business funding in California, then a business line of credit might be the way to go. This financing option (which technically isn’t a loan) gives you the cash you need when you need it and nothing more.

After receiving an approval for a set limit, you can then draw the amount you need. As you need more, you can draw more cash up to the full amount you were approved for. You’ll only pay interest on what you take, and as you pay it down, you can draw more cash.

For business owners with potential growth or problems to resolve ahead, this is one of the best options. It’s also a great tool to have on hand when preparing your business for a recession.

Equipment Financing Rather than leveraging California business loans to buy new equipment, you may be able to use equipment financing. This financing option helps you purchase new equipment outright instead of renting it. It’s available in nearly every industry and with no up-front fees.

Unlike the equipment financing process of years past, new programs can help you qualify and get funding right away. In addition to purchasing new equipment, you can also write off the entire cost of the equipment in year 1.

Small Business Administration (SBA) Loans SBA loans are some of the most coveted financing options available to California entrepreneurs. The most popular of the SBA loans, the 7(a) program offers low-interest rates over long terms, but you could also opt for their 504 program, disaster loans, or microloans.

Applying for an SBA loan can be quite time-consuming, with a lengthy application and months-long turnaround time. The standards for qualifying are also quite high, with 2+ years in business, $500K in annual revenue, and a 685+ FICO forming the minimum qualifications.

Banks often offer low-interest rates, but attached to this low price tag is a time-consuming process. Even the best small business banks in California will likely take at least 1-2 months to process your application. If your opportunity won’t disappear in that time, though, this may be your best bet.

Alternative lenders specialize in helping small businesses get funding for new opportunities in tight time windows. They also offer a simplified application and approval process. If you qualify, you can sometimes receive funding on the same day.

Eligibility Criteria for Small Business Loan Options in California

Qualifications vary based on the lender you’re working with, the type of financing you’re seeking, whether you’re offering collateral, and many other factors. Generally, you’ll need at least 1 year in business, well-established revenue streams, and a “fair” to “good”

You’ll have to apply with multiple organizations to understand the general terms your business qualifies for. At National Business Capital, we make this easy by leveraging a diverse lender network to connect you with the most competitive financing offers your business qualifies for.

To work with us, here’s what you’ll need:

  • 1+ Year in Business
  • $500,000+ in Annual Revenue

From there, our Business Finance Advisors do the heavy lifting for you. They learn about you, your business, and your unique circumstances, then apply you to the lenders most likely to return a competitive offer. They return decisions, and we work with you to select the offer that best fits your growing business.

How to Apply to Get Funds for Your California Business

At National Business Capital, we specialize in helping small businesses across the country get the funding they deserve. Here’s what to expect from our process.

  1. Apply Securely Within Minutes – Move through our streamlined application within minutes and upload your business documents with zero risk.
  2. Review Your Offers – Compare your offers with expert advice from our team and select the best one for your specific circumstances.
  3. Receive Your Money – Seize an immediate opportunity to grow your business or tackle a new challenge with confidence.

Our diverse lender platform gives you access to the most competitive rates, terms, and amounts you can qualify for, with options in minutes and funding in just a few hours. We help businesses in all industries, including cannabis, with the Cannabusiness Financing Solution.

Get started taking your business to the next level by applying now!

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Frequently Asked Questions

Are There Any Specific Government-Backed Loan Programs for Small Businesses in California?

Yes! Entrepreneurs can leverage The California Rebuilding Fund, the Small Business Loan Guarantee Program, the California Capital Access Program (CalCAP) for Small Business, and GoGreen Business Energy Financing, among a few other programs. For more information about these programs, reach out to your local government.

What Types of Interest Rates Can I Expect for Small Business Loans in California?

Interest rates vary between different financing solutions, lenders, and more. The economic conditions surrounding your transaction will also influence your rate. In 2023, interest rates are higher because of the fight to quell inflation.

Lenders use the prime rate as a baseline when determining a borrower’s interest rate. Banks and credit unions use prime + 2-3%, while non-bank lenders are a bit higher.

Although the cost of capital is important, it shouldn’t deter you from pursuing an opportunity to drive additional revenue in your business. If the terms and your opportunity make sense, remember that your investments will drive profits well after you’ve covered your interest rate.

What Documentation Is Typically Needed When Applying for a Small Business Loan in California?

Documentation also varies on the lender and financing solution you’re seeking. Here are a few of the most commonly requested documents, although your lender may ask for some or all of them.

  • At least one full year of business bank statements
  • Two – most recent – business tax returns
    Balance sheet
  • Cash flow statement
  • Profit and loss statement
  • Business debt schedule, if applicable
  • Details of accounts receivable and accounts payable
  • Description of and proof of ownership for collateral
  • Proof of business insurance
  • Licenses, permits, articles of incorporation, and other legal documents
  • Business certificate
  • Detailed personal financial information
  • Complete business plan, including a detailed description of your business, products or services, structure, management, and marketing plan, as well as financial projections

How Long Does the Approval Process for a Small Business Loan Usually Take in California?

That depends – Are you working with a bank or non-bank lender?

Banks and credit unions notoriously take 30 to 90+ days to respond to applications, whereas non-bank lenders can approve you within hours. If you need fast funding, it’s best to work with a non-bank lender.

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About the Author

Joseph Camberato

Joe Camberato is the CEO and Founder of National Business Capital. Beginning in 2007 out of a spare bedroom, Joe and his team have financed $2+ billion through more than 27,000 transactions for businesses nationwide. He’s made it his calling to deliver the educational and financial resources businesses need to thrive.

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