A Comprehensive Guide to Securing a Business Loan in California

Getting a business loan can be complicated, but the process may be easier for business owners in California. That’s because the Golden State has a history of encouraging and supporting small business growth.

In the 2022 Small Business Profile from the U.S. Small Business Administration Office of Advocacy, over 98% of businesses in the state are designated as small businesses. In addition, reporting banks issued $14.8 billion in small business loans to California businesses with revenues of $1 million or less in 2020.

There are numerous small business loan financing opportunities for business owners who need extra capital, including specific California business loans and California small business grants.

Here’s a bonus: California has higher standards for lending practices than most other states. The state recently signed Senate Bill 1235, which requires lenders and other financial institutions to abide by certain transparency regulations when offering financing to small businesses. As a result, California business owners have more information and legal protection when exploring their financing options.

That said, securing a small business loan in California requires careful planning and preparation. From determining your financial needs to navigating the application process, there are many factors to consider. In this comprehensive guide, we’ll walk you through everything you need to know to secure the funding you need to take your business to the next level.

If you’re considering a small business loan to help grow your business, here are 8 good options for small business loans in California!

Top California small business loans

1. California Small Business Loan Guarantee Program

The Small Business Loan Guarantee program is available to small businesses throughout the state of California and serves hundreds of small businesses each year. Eligible applicants include California small businesses with up to 750 employees, and credit qualifications are based on lender criteria. One of seven Financial Development Corporation (FDC) partners throughout the state can help provide technical assistance as well as process small business loan guarantees for qualifying small businesses. Eligible uses of the Small Business Loan Guarantee program financing proceeds include start-up costs, construction, inventory, working capital, business expansion, agriculture, lines of credit, and more.

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For less established small businesses wondering how to get a small business loan in California, there’s also a Jump Start Loan Microloan Program, which offers up to $10,000 to small businesses in underserved communities. The Jump Start loan program can help start or grow businesses for entrepreneurs that may not qualify for loans at traditional lenders or other programs because they are often too new or too small.

2. California Capital Access Program for Small Business

The California Capital Access Program for Small Business or CalCAP is a loan loss reserve program that can cover up to 100% of certain business loans from California lenders. The program was designed to motivate banks and financial institutions to provide small business loans to those who have struggled with financing in the past.

To apply for a California small business loan through the program, your primary business must be in California, as well as at least 51% of your employees or income. If you qualify, you can use your small business loan for start-up costs, working capital, refinancing, inventory, equipment, or real estate purchases. However, the funds you spend must go toward projects created and maintained in California.

California business loans by area

3. Working Solutions

Working Solutions is a CDFI that lends to both startups and established businesses in the nine San Francisco and Bay Area counties. If you qualify for a California small business loan with them, you can borrow anywhere from $5,000 to $50,000 for up to five years with interest rates between 9% and 11%. There’s no minimum credit score, minimum revenue, or collateral required to apply.

4. San Diego Commercial and Business Financing

San Diego Commercial and Business Financing (SDCBF) focuses primarily on commercial real estate financing, but they also offer small business loan options for small business owners. In addition to business lines of credit and accounts receivable loans, SDCBF also offers SBA 504(b) and 7(a) loans. Though most businesses use loans to purchase real estate, you can also put the funds toward business acquisition, equipment, or furniture.

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5. Heritage Bank of Commerce

Based in Northern California, Heritage Bank of Commerce is a local bank that serves small businesses located in and around San Jose. Their loan products for small businesses include credit cards, lines of credit, and term loans — for everything from short-term financing needs to long-term growth projects like expansion, company acquisition, or building renovations.

6. Los Angeles County Development Authority

The Los Angeles County Development Authority has a handful of small business loan programs designed to support businesses in LA County. Their SMART Funding program lends businesses involved in one of the following industries: manufacturing, clean technology, health, medical, or transportation development. If your business qualifies for SMART Funding, you can use the small business loan for a variety of needs, including refinancing, real estate acquisition, inventory, working capital, equipment, and job creation.

7. Accion Opportunity Fund

Accion, a nationwide nonprofit lending network, helps support small businesses across the country. Through innovative partnerships and outreach strategies, their small business loans target underserved entrepreneurs — including entrepreneurs of color, low-income entrepreneurs, and women — who often lack access to the financial services they need to build and grow their businesses.

Accion’s Small Business Loans offers amounts ranging from $5,000 to $100,000, as well as educational resources, coaching, and support networks in English and Spanish. They also offer a unique lending model: When you repay your loan, they’ll reinvest that money into other small businesses. So, by taking out a small business loan, you not only allow your own business to thrive, but you also help support other small business owners in your community and beyond!

8. Los Angeles Federal Credit Union

The Los Angeles Federal Credit Union (LAFCU) gives loans to California business owners that need capital for expansion, advertising, equipment, inventory, and more. Loans range from $20,000 to $5 million and have no prepayment penalties. However, you need to be a member of the LAFCU to apply for small business loans, which means you need to live in the greater LA area or work for the city of LA to qualify.

How difficult is it to secure a small business loan in California?

Despite so many options, banks have historically viewed small businesses as greater financial risks, choosing instead to finance large corporations — after all, large corporations requesting hefty loan sizes mean more money for the lender.

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For new business owners who need help getting started and don’t yet have a proven track record of sales, it can be extremely difficult to qualify for small business loans through a bank. Not only do you usually need excellent personal and business credit, but you also need proof of revenue, a healthy cash flow situation, and at least a few years of experience running your business. And oftentimes, banks prefer to lend to those looking for upwards of $1 million.

What other options are there for small business owners in California?

State and local government

State and local government organizations in California occasionally offer grants to small businesses. The Capital Infusion Program, for example, which is run by the California Governor’s Office of Business and Economic Development, provides grant funding to the California Small Business Development Center Networks. To find other California-specific grants, visit the Economic Development Administration website to explore the resources available within state agencies. You can also check USA.gov to search for funding opportunities in California.

Alternative lenders like Funding Circle

If you’re having a difficult time finding a California-specific small business loan, consider applying for a loan with an alternative lender.

Alternative lending refers to any lending practice that happens outside a traditional banking institution. Some non-bank lenders operate online using a peer-to-peer model. This system, also referred to as marketplace lending, connects business owners seeking capital with established investors willing to provide it.

At Funding Circle, for example, your small business can borrow up to five years with competitive interest rates. Plus, you can get a decision in as little as 24 hours after applying. These are just a few of the California small business owners who’ve used a Funding Circle loan to grow their operations:

  1. Just Jan’s
  2. Kate Lester Interiors
  3. Philosophie Group
  4. Koshland Pharm Custom Compounding Pharmacy
  5. Virtual Driver Interactive
  6. Maika Goods
  7. Besame Cosmetics
  8. Mid-Valley Veterinary Hospital
  9. Peak Design
  10. Solé Bicycle Company

Curious to learn more about alternative lending and small business loans? Get started by checking out Funding Circle’s term loans. Learn more about us or see how we compare to other lenders!