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Small Business Loans in California: How to Secure Your Loan

By sbanderas | September 8 2020

Is your business struggling? Perhaps you need additional capital to expand your business. 

Regardless, you’ll find many types of small business loans in California. You can find lenders that care more about your income than your credit. Various organizations in California will guarantee your loan.

Also, the federal government provides a loan guarantee under the Small Business Administration (SBA). However, some loan programs offer stringent requirements, such as hefty collateral mandates or high credit minimums.

This article will show you how to get a business loan in California. Let’s explore.

State Programs

Under the Small Business Finance Center (SBFC), the state of California guarantees business loans. Business owners will apply via the Small Business Loan Guarantee Program.

Small businesses with up to 750 workers can apply. The SBFC works with finance companies in providing loans to California businesses.

Businesses can borrow up to $20 million, with the SBFC guaranteeing anywhere from 80 to 95% of the loan balance. 

Despite the advantages, lenders generally prefer well-established businesses. Moreover, the credit thresholds depend on the lender’s discretion. 

Conversely, the Jump Start Loan Program helps businesses who don’t qualify for SBFC loans. Jump Start also helps communities that otherwise cannot obtain financing. Under Jump Start, businesses can borrow up to $10,000. You can use the funds for the following purposes:

  • Start-up capital
  • Real estate deals
  • Tenant renovations
  • Inventory needs
  • Machinery or equipment purchases

To qualify for this program, show proof that you can repay the loan. Additionally, you can apply as an individual who is starting a business. With that, the Jump Start program may not be the best option if you need over $10,000. 

SBA Loans

Like the SBFC, the SBA guarantees a portion of the loan. You have three primary options when it comes to SBA loans:

  • 7(a) Standard
  • 7(a) Small Loan. 
  • 504 SBA Loan

The 7(a) option is the most common loan package. Overall, you could borrow up to $5 million. The SBA will guarantee 85% for loans up to $150K and 75% for anything over $150,000. 

The 7(a) Small Loan option is a smaller version of the standard 7(a). You can only borrow $350,000 and the SBA offers an 85% guarantee.

The 504 alternative is for real estate projects. The SBA will finance up to 40% of the project costs. This program is primarily for real estate professionals, but it also applies to business owners.

If you need a fast loan approval, choose the express option. The SBA Express Loan program will reject or approve your application in as little over 24 hours. 

Regardless, the interest rate and terms depend on the lender’s guidelines. However, the interest is negotiable.

Since the SBA guarantees a portion of the loan, lenders are more willing to lend you the funds. The main problem is that the lender and the SBA prefer established businesses.

Further, this isn’t a good loan option if you have a low credit score. Even though the SBA doesn’t have an official credit minimum, lenders generally prefer scores in the mid 600s. The credit requirements are usually higher for anything over $50,000. 

Moreover, the SBA usually imposes collateral requirements on the borrower. Collateral can be assets in the form of cars, stocks, or houses.

If you fail to pay back the loan, the lender can seize your collateral to recoup the losses. With that, you’ll find business loans in California that come with no collateral requirements. 

Alternative Loans

Many online lenders offer small business loans to California business owners with less-than-stellar credit. For instance, a borrower with a score of less than 600 can still obtain financing. The terms vary from 3 to 10 years, and you can negotiate the structure of the loan.

Even though alternative lenders are less stringent than standard lenders, your application could face rejection if you have a high debt-to-income ratio. Therefore, try to pay down your debts as much as possible before applying.  

If you have bad credit, unscrupulous lenders may also try to impose higher interest rates on borrowers who cannot afford it. A loan with a higher interest rate increases your monthly payments and increases the likelihood of default.

Don’t believe anyone who claims you must contend with an exorbitant interest rate. You’ll find alternative lenders offering fair rates to borrowers with credit issues. 

Accion Rapid Loan Program

Accion lends nationally, but the lender offers a program in California called Accion Rapid Loan. The loan is available in four counties in Southern California: 

  • Riverside
  • San Diego
  • Imperial
  • San Bernardino 

Accion Rapid program derives its name from the fast approval process of three days or less. You can borrow between $300 and $8,000.

The program is for startups and established businesses alike. You can use the funds for anything business-related, such as investments or upgrades. You need a minimum score of 550 to qualify, and you must prove you can repay the loan.

Small Business Loans in California: Which Is the Right Choice for Me?

The right small business loans in California depend on your budget and preference. If you have a low credit score, consider applying with a lender who has lenient lending standards.

Find a lender who prioritizes business income instead of credit profiles. In most cases, you can get a business loan if you have stable business revenue. 

If you have a higher credit score (mid 600s), you may even receive approval from the SBFC or the SBA. However, loan support from the federal government may come with stringent requirements, such as collateral obligations. 

Are you interested in a small business loan? Click here to learn how we can help you obtain fast and simple online title loan financing