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California is home to an astounding 4.1 million 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. Whether you need working capital to help cover day-to-day expenses or you want to open up a new business, a small business loan in California can help your business thrive.
Top Five California Small Business Loan Options
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.
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 the 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 depending on circumstances. Finally, the corresponding interest rate can vary, depending on which direct lender provides you with a loan.
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 six 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.
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:
- Proof of address
- Business address
- One year’s worth of business tax returns
- Minimum credit score of 550
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.
Summary of Top 5 California Small Business Loans
|Institution||Type of Loans||Amounts granted||Term||Interest Rates|
|CalCAP||Credit loss reserve program and small business loans||Up to $5 Million||Minimum of three years||Depends on the lender|
|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|
|VEDC||Standard business loans, microenterprise loans, and VEDC microloans||$50K to $500K;
$2.5K to $50K;
$500 to $2.5K
|Six months to five years||8%,
|Accion||Small business loans||$300 to $8,000||Up to three years||14% - 18%|
|LA Community Development Commission||Small and Medium business loan||$25,000 to $1.5 Million||It depends on the loan amount||It depends on the loan term|
Top Online California Small Business Loan Options
Alongside local loan providers and financial institutions, make sure to take online business loans into consideration. Funding times are typically quicker and qualifications are less stringent, but interest rates and fees may be higher. Below are some of the best online options available to California small businesses.