Small Business Loans California: Your Local Funding Guide for 2020

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Your Local Funding Guide to California Small Business Loans

Small business loans in California are transparent and user-friendly—because they have to be. California recently signed into law SB 1235, which puts into place transparency requirements for small business lending that mirror the regulations that federal law places on consumer lending.

If you’re borrowing for your small business in California, then you can rest easy knowing you’re seeing the full picture—even when small business owners in other states, working with the same lenders, might not necessarily have access to as much information as you.

Searching for small business loans only locally available in California could make for even more transparent, community-based funding. Indeed, small business loans specifically for California small businesses are some of the most affordable and growth-focused options in the nation.

The top 8 sources of California small business loans are:

  1. California Small Business Loan Guarantee Program
  2. VEDC
  3. SMART Funding Program
  4. Accion Rapid Loans
  5. CalCAP
  6. Jewish Free Loan Association
  7. Opportunity Fund
  8. Wells Fargo

Consider yourself lucky to be running a small business in the great state of California, which makes you eligible for the top eight California small business loan options we highlight in this local funding guide for the golden state.

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Top 8 California Small Business Loan Options

Because of Senate Bill 1235, signed into California state law in October 2018, California is one of the very best states to be a small business borrower in. The state law requires all small business lenders to meet transparency requirements so that small businesses know exactly what they’re getting themselves into when they sign a business loan agreement.

So, small business loans in California are, by law, more transparent and better for the borrower. On top of that, though, there are multiple state and local government-led small business loan programs that offer affordable funding to California small businesses in need of capital.

These two upsides combine to make California small business loans some of the very best in the nation, and we’ve compiled details on eight of the best options here:

1. California Small Business Loan Guarantee Program

Small business loan guarantees are available for California small businesses through the California Small Business Loan Guarantee Program. This small business loan guarantee program is run by the Small Business Finance Center of the California state government in partnership with seven Financial Development Corporations.  Through the California Small Business Loan Guarantee Program, the Small Business Finance Center provides 80% – 95% guarantees of the small business loans that FDC’s lend directly.

To be eligible for the guarantee program, you’ll need to run a small business in California with 1 – 750 employees. Some nonprofits will also be eligible. That said, the FDC’s that lend directly through the program will have their own requirements, so be sure you meet those before applying to a given lender through this program.

Small business loans through the California Small Business Loan Guarantee Program can be as large as $20 million, though can only come with guarantees of up to $2.5 million. Repayment terms for these California small business loans will be at least seven years long but could stretch longer. Interest rates attached to these small business loans will vary based on which direct lender you fund with. Apply directly with your nearest FDC to see if you qualify for this California small business loan option—and what rates and terms you qualify for if you’re eligible.

2. Valley Economic Development Center Small Business Loans

Small business loans for California businesses are also available through the Valley Economic Development Center. VEDC small business loans can come in three forms: Standard Business Loans, VEDC Microloans, and Microenterprise Loans. And they’re only available for small businesses in California and New York.

The VEDC Standard Loan ranges from $50,000 to $500,000 with repayment terms from six months to five years, interest rates as low as 8%, and origination fees of 2%-3%.

VEDC Microloans will be smaller with loan amount from $2,500 to $50,000, repayment terms from six months to five years, interest rates from 7.75%, and origination fees of 3%-5%.

Microenterprise Loans from VEDC will be the smallest option they offer: Loan amounts will range from $500 to $2,500 with repayment terms from six months to two years, interest rates as low as 8.5%, and origination fees of just $25-$50.

Small business owners in California who are looking for loans as small as $500 or as large as $500,000 would do well to check out the affordable, transparent small business funding options that VEDC offers their state.

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

A top California small business loan option for businesses in Los Angeles is the SMART Funding  program. Los Angeles County Community Development Commission/Housing Authority runs the SMART Funding to provide affordable business loans to established small to medium businesses.

SMART Funding business loans provide funding in amounts from $25,000 to $1.5 million to small businesses in manufacturing, clean tech, medical, and transportation development. These small business loans can be put towards business expenses like real estate acquisition, inventory purchases, working capital, equipment purchases, leasehold improvements, job creation, employee retention, and even debt refinancing.

If you fit the bill for this niche California small business loan, then SMART Funding could offer your business the capital it needs to grow.

4. Accion Rapid Loans

Though Accion provides small business loans across the nation, the Accion Rapid Loan is only available to California small businesses. If you’re running a small business in Imperial, Riverside, San Bernardino, or San Diego counties, then you’re eligible for this California-specific small business loan option.

Accion Rapid Loans offer small business loan amounts of $300 to $8,000 with repayment terms of up to three years and fixed simple interest rates of 14%-18%. A 1% discount will be available to veterans, active duty military, and spouses, as well.

This small business loan for California-based businesses is called “rapid” for a reason: You’ll be able to access approval in as little time as three days. Plus, you’ll only need to provide ID, proof of address, business license, and a year of business tax returns to apply.

Beyond being based in California, be sure you meet the 550 minimum credit score requirement for this small business loan option. If you meet that requirement and you need quick access to business funding that won’t break the bank, look to the Accion Rapid Loan for your California small business.  

5. California Capital Access Program for Small Business

Yet another small business loan option for California-based businesses is the California Capital Access Program for Small Business, or CalCAP for short. This program is a loan loss reserve program that can provide up to 100% of coverage for small business loans from a participating California small business lender. Through this California small business loan program, participating lenders are able to enroll all or a portion of any loan they disburse into their loss reserve account. Lenders can provide small business loans of up to $5 million, but they can only enroll up to $2.5 million per loan. The program also sets a $2.5 million enrolled capital maximum for individual borrowers over a three-year period.

To be eligible for the CalCAP program, you must have your primary business and at least 51% of your employees, business income, sales, or payroll in California. You can use the proceeds of a loan you secure through CalCAP for a number of business expenses—think working capital, equipment purchases, inventory purchases, and even startup costs. However, CalCAP specifies that the investment you make with the loan proceeds must take place and be retained within the state of California.

If the small business loans that California businesses can access through the CalCAP program sound like they can address your funding needs, start checking out their list of participating lenders to find your most local option.

6. Jewish Free Loan Association Small Business Loans

Highly-qualified California small businesses should also consider the Jewish Free Loan Association as a top-tier funding source. JFLA offers interest-free small business loans of up to $75,000 to California small businesses with owners who are permanent residents of Los Angeles and Ventura counties.

If you want to access a small business loan of up to $30,000 through JFLA, you will need to come to the table with two guarantors with good credit and steady income. For small business loans greater than $30,000, JFLA will require three guarantors with good credit and steady income. Also note that JFLA can’t provide loans to nonprofit organizations.

To be sure, an interest-free business loan is great for the small business but risky for the lender. As a result, JFLA’s application will be pretty rigorous, requiring years of personal and business tax returns. Check out the JFLA application requirements for small business loans of up to $15,000 and those for small business loans of up to $75,000 to see if you’re a fit for this program.

7. Opportunity Fund

Small business loans for California businesses can also come from Opportunity Fund. Opportunity Fund is one of the largest nonprofit small business lenders in the country, and though they are beginning to offer their traditional small business loans in more states, Opportunity Fund maintains its roots in California and offers a variety of funding options only available to California small businesses.

Opportunity Fund’s small business loans for California businesses specifically include Micro, Express, Easy Pay, Commercial Vehicle, and Mobile Food Truck small business loans. Each will come with transparent, affordable pricing, and all but Mobile Food Truck loans will require at least a year in business, on-time payments, and credit history free of liens or delinquencies.

Opportunity Fund’s small business loan product, now available in multiple state beyond California, will offer $30,001 to $250,000 in funding with repayment terms of up to five years long and APRs as low as 9.6%. To be eligible for this option, you’ll also need at least a year in business, on-time payments, and credit history free of liens or delinquencies.  That said, Opportunity Fund is willing to work with applicants who have limited credit.

8. Wells Fargo SBA Loans

Any small business anywhere should consider SBA loans a top option for affordable business funding. And this rule absolutely applies to California small businesses on the search for the most affordable small business loan rates possible.

Wells Fargo bank was the top SBA lender in California for 2018, having lent 1188 SBA loans total, with an average loan amount of $420,336 and an average interest rate of 7.7%. Though Wells Fargo is a large national bank, their track record of providing SBA-backed funding to California small businesses should put them on your radar during your hunt for the best small business loan options.

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Online Lenders That Provide Small Business Loans to California Businesses

Small business loans in California are required by law to be borrower-friendly, whether the lender in question is California-specific or not. As a result, small business borrowing in California is remarkably more approachable—and less anxiety-inducing—even with national lenders.

California small businesses are in a unique position: They can shop for funding from national and local lenders knowing they will get all of the details they need to in order to make the best decision possible. And, unfortunately, this isn’t the case for all small business owners across the US.

As a result of this unique position, California small businesses should online business loans that are nationally available alongside small business loans for California businesses only.

Here are some top options to shop and compare to your California small business loan options:

1. Kabbage

If you’re looking for quick, easy access to small business funding, then look to Kabbage short-term lines of credit as a valuable counterpart to your California small business loan options. Kabbage offers credit limits of $1,000 to $250,000 with repayment terms of 6, 12, or 18 months long. Kabbage is one of the very few short-term options that will offer monthly scheduled payments rather than the daily or weekly payments that competitors typically offer.

If you and your business come to the table with at least $50,000 in annual revenue, personal credit of at least 550, and a year in business, you’ll be eligible for this funding option.

But what really makes Kabbage an outlier is its streamlined application processes: To apply for Kabbage funding, you’ll simply need to sync your business’s financial accounts—think Amazon, PayPal, QuickBooks—and Kabbage will underwrite based on that. If you qualify for funding from Kabbage, you could have access to your line of credit within the same day you apply.

2. Lending Club

Finally, if you’re looking for longer-term funding for your California small businesses, then look into Lending Club. Unlike Kabbage, Lending Club offers small business loans with longer repayment terms that range from a year to five years long. Lending Club business term loans can range in size from $5,000 to $300,000 and rates can be as low as 5.9%.

Plus, you won’t need to be perfectly-qualified to access this longer-term funding option: If you and your business have at least $50,000 in annual revenue, a personal credit score of at least 620, and at least a year in business, you’ll be eligible for a term loan from Lending Club.

And in contrast to your California small business loan options, Lending Club loans won’t require you to submit a huge stack of paperwork to apply. All you’ll need to submit will be three months of business bank statements and your most recent business tax return. And if you qualify, Lending Club can fund you application as quickly as a day later.

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The Bottom Line

Now that you’ve made it through your guide to small business loans for California-based businesses, it’s time to start thinking next steps. California-specific small business loan options are pretty stellar. However, most of them will require a rigid underwriting process and the credentials to withstand such scrutiny. Online business lenders that fund California small businesses are a solid alternative for the less than perfectly qualified. That said, searching for local funding and online funding are far from mutually exclusive—see what your options are from national, statewide, and local sources, and choose the best fit for your business.

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Vice President and Founding Editor at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. She launched the Fundera Ledger in 2014 and has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending. She is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more. Email: meredith@fundera.com.
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