How to Get a Small Business Loan in California
Whether you own a small business in the Golden State or have plans to start one, small business loans can be invaluable. In this blog post, we’ll dive deep into everything you need to know about small business loans in California.
What to Do with Small Business Loans in California
Most California small business loans are flexible. Once you receive the funds, you can put them toward a variety of expenses to run or grow your business. The most common uses for small business financing options include:
- Startup costs
- Commercial real estate
- Inventory and supplies
- Debt consolidation
Types of Small Business Loans in California
California offers a variety of small business loans. While some of them offer quick funding, others will require you to wait weeks or months. When you shop around for business loans in California, you’ll likely come across these options.
Commercial Real Estate Loan
Often referred to as a commercial mortgage, a commercial real estate loan can help you finance a property or land for your business. Terms for commercial real estate loans usually range from five years or less to 20 years. Most lenders that offer them will require to be in business for at least two years and meet certain annual revenue requirements.
Term loans are offered by banks, credit unions, online lenders, and other financial institutions.
If you have a solid credit score, you may be able to lock in a low rate and favorable terms. Upon approval, you’ll receive a lump sum of money upfront and repay it over time via fixed monthly payments. Bank loans may come with terms ranging from a few months to several years. However, alternative lenders may be able to provide more attractive terms and rates.
SBA loans are backed by the U.S. Small Business Administration. There are many types of SBA loans, such as SBA 7(a) loans, SBA Express loans, SBA 504 loans, SBA microloans, and SBA disaster loans. To pursue an SBA loan, you’ll need to find an SBA-approved lender and go through the lengthy application process. Depending on your situation, you may be able to receive up to $5 million in funding.
Line of Credit
A line of credit is similar to a credit card. You’ll be able to withdraw funds whenever you’d like, up to a set credit limit. Once you repay what you borrowed, those funds will become available to you again. While lines of credit don’t offer credit card perks like cash back and travel points, they tend to come with lower interest rates and larger amounts.
Microloans are small loans of up to $50,000, typically offered by mission-based nonprofit organizations and the SBA. If you’re having trouble qualifying for traditional business financing, you may want to explore microloans. They can help you build your credit and even provide you with useful tools and resources.
If you need equipment to operate successfully, equipment loans make sense. You can use an equipment loan to purchase or lease any type of equipment, including computers, fax machines, backhoes, and bulldozers. Since equipment loans are secured loans, the lender will have the right to seize the equipment if you default.
Invoice factoring gives you access to fast cash in exchange for your outstanding customer invoices. You sell your invoices to a factoring company at a discount. The company will then collect payments on your behalf, usually in 30 to 90 days. You’ll pay a factoring fee or discount rate that may be anywhere from 1% to 5%, depending on the invoice amount and your sales volume.
Resources for California Small Business Owners
As a small business owner in California, you may find these resources worthwhile.
- California Small Business Development Centers: The Golden State has dozens of small business development centers, which are aimed to develop and retain small businesses. They offer one-on-one advising, trainings, and workshops you can take advantage of for free or at a very low cost.
- Plug and Play: Founded in Sunnyvale California, Plug and Play runs accelerator programs (three-month programs for startups) and invests in hundreds of startups every year. It offers all the support startups need to grow.
- Los Angeles SCORE: Los Angeles SCORE provides mentorship and workshops to small business owners in L.A.. Its website features a robust library of useful information for entrepreneurs.
- California Capital Financial Development: This organization hosts a variety of programs to promote small business development. You can take advantage of its loan guarantee programs, bilingual business success forms, and entrepreneurial academy.
Conclusion: Succeed with California Business Loans
No matter what your working capital goals may be, small business loan options in California are sure to help you meet them. They’ll provide you with the capital you need to launch or grow your venture. Before you sign on the dotted line and commit to a loan, however, make sure you’re clear on its rates, terms, and fees.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.