With a booming economy and large population, California is an attractive place to start a small business. Whether you’re launching a startup or expanding your existing business, securing the right financing is an important first step to success. Learn more about getting a small business loan in California, including what types of loans are available and how to apply.
In California, small business owners have a wide variety of loans to choose from:
Small business loans from banks or credit unions, known as traditional loans or term loans, are a staple of secure and established financing for small businesses. Whether you opt for a local bank or a national bank, many financial institutions offer a number of loan types and usually offer step-by-step guidance from an account manager along the way. Term loans also tend to have very competitive interest rates and repayment terms, provided your business has the right qualifications (such as credit score, time in business and annual revenue) to pay back the loan.
Loans from the U.S. Small Business Administration (SBA) are a very popular choice for small businesses in California. With a number of programs tailored to different borrower’s needs, competitive rates and terms and a backing from the federal government, SBA loans are extremely popular across the country. This also means they’re extremely competitive, so it’s important to ensure you have the right qualifications before applying.
Loans from online lenders or other sources may be easier to secure than traditional loans or SBA loans because the lenders are willing to lend to riskier borrowers, such as startups and those with lower credit scores. They also tend to provide faster application processes and funding times. However, because of the risk factor, they tend to offer much higher interest rates and shorter repayment terms, which can get expensive for a small business. Make sure you understand the terms and conditions fully before you sign up for an alternative loan so that you don’t end up in default.
Business grants are extremely competitive, and securing a business grant in California requires a strategic approach. Start by tapping into local resources. Small Business Development Centers (SBDCs) and chambers of commerce are invaluable assets. They often serve as a good source of information and connect business owners with potential grants and loans.
The digital landscape is also filled with opportunities. Websites like California Grants Portal and Grants.gov have a wide range of grant opportunities. These platforms allow you to narrow down options based on your industry, business type, and specific eligibility criteria.
Additionally, networking is a powerful tool for finding a business grant in California. Attend industry events, workshops and seminars to engage with other business owners and industry experts. They might have insights into niche grants or lesser-known funding sources.
Preparation is key for applying for a small business loan in California. Follow these steps to help you have a smooth and successful application process:
Lenders use your credit score as the top way to judge your creditworthiness – that is, whether or not you’ll be able to repay a loan. While they also take other factors into consideration, such as your business’s annual revenue, business plan and personal guarantees or collateral, having a better credit score will generally help you get better interest rates and repayment terms.
In California, a credit score of 620 or above is a good starting point when applying for alternative loans. SBA loans may require a credit score of 680 or above. If you want to get the best loan terms and rates, aim for a credit score of 700 or higher.
If your credit score is low, you may want to consider alternative financing options such as a business credit card or crowdfunding until you can rebuild your credit. The best way to build credit is by making regular payments to a finance option that reports to the credit bureaus, which may include invoices from vendors or even business credit cards.
Interest rate son business loans in California vary based on the lender, the type of loan, the amount of the loan and your credit score, among other factors. You can expect the following rates for most loans, but always make sure to check with your lender:
How long it takes your funds to be deposited into your business bank account will depend on the type of loan and the lender. For quick options like online loans, you may be able to get the money in as quick as two days after approval. For traditional loans, the approval process and underwriting can take a few weeks. SBA loans may take as long as six months due to their approval processes.
While traditional loans are the bedrock of business financing, alternative options can be game-changers for some businesses, especially if you don’t have a high credit score or several years in business. A few alternative options include:
To find the best business funding in California, it’s important to research the diverse landscape of financial opportunities. Start by looking into industry-specific grants, loans and tax incentives offered by the state. Research locks venture capital firms and angel investor networks that fit your business goals.
You should also explore crowdfunding platforms tailored to California’s market. Engage with networking events and business meetups to make valuable connections and get insight into how to find funding. Don’t forget about government programs and help from the SBA, which has offices in different localities to help answer questions and set you up with the right resources.
Ready to secure funding for your small business in California? Get guidance from Swoop. With a wide range of funding options and a team dedicated to help you succeed, Swoop can help you find the financing you need to make your business thrive. Get started today.
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Swoop was actually very helpful in helping us get our initial fundraising in place. Swoop was able to connect us with investors, with grant financing options and debt financing options.
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