How To Get a Small Business Loan in California


Disclosure: Our content is reader-supported, which means we earn commissions from links on Digital. Commissions do not affect our editorial evaluations or opinions.

Considering that California’s state motto is “Eureka!” (meaning “I have found it!”), it’s no surprise this is one of the top states for entrepreneurs to launch their business ideas. With California as your home base, you can access many small business loans and economic development resources to support your company.

Here is what you need to know about small business loans in California.

How Much Does It Cost To Start a Small Business in California?

Three people discussing business loan.

Startup costs vary widely from business to business, and estimating them for your unique company needs is difficult.

You will need a business license, which typically costs between $50 and $100.

If you need a “doing business as” (DBA) name that is separate from the official name of your Limited Liability Company (LLC), you must register it within 40 days of your business launch.

You can locate the appropriate office near you and file an application for your DBA; costs differ according to the county. In Los Angeles County, it costs $5 to search the business name database and $26 to file your application.

You must also check for licenses and permits specific to your business.

How to register your business in California

To register your business with the Department of State, you need to identify your business structure.

If you’re unsure which structure is best for your business, you can hire a financial advisor to help determine which one’s right for you.

Here are the common business structures and fees:

  • Sole proprietorship: You don’t have to register for this in California.
  • LLC: It costs $70 to register by filing for Articles of Organization.
  • Corporation: To register, file for Articles of Incorporation, and pay the $100 fee.
  • Limited partnership: It costs $70 to register for a Certificate of Limited Partnership.

What business licenses and permits do you need in California?

Rather than the state, cities issue business licenses in California. Because business licensing is so disparate throughout the state, the Governor’s Office of Business and Economic Development offers a license and permit search tool to help you find what you need.

What Small Business Loans Are Available in California?

Business analysis paperwork with a pen and calculator.

Getting a traditional bank loan will likely be difficult for a new small business owner, but many loan programs have been created to support small businesses.

These programs often include a loan guarantee, which means the program will cover a portion of the loan price if you default. This makes lenders more willing to take a chance on a new small business.

IBank’s Small Business Finance Center Loan Guarantee 

The Small Business Finance Center (SBFC) has supported small business owners and entrepreneurs since 1968. It provides access to capital that businesses can use for startup costs, inventory, construction, and more.

To qualify for this loan program, you must have an established business entity and have between one and 750 employees. Unlike many small business loan programs, the SBFC doesn’t make U.S. citizenship an eligibility requirement.

Working Solutions CDFI loan program

The Working Solutions CDFI offers a unique loan program that combines funding opportunities with one-on-one mentorship throughout the loan’s life.

The program provides microloans between $5,000 and $100,000. It’s ideal for new businesses because there’s no revenue requirement to apply.

Valley Small Business Development Corporation State Small Business Loan Guarantee Program

The Valley Small Business Development Corporation (VSBDC) offers a loan guarantee program backed by a trust fund created by California. Through this program, you work directly with a lender, who then works with VSDBC to get the loan guaranteed.

This program has one of the largest loan guarantees; one offers up to 80% on loans up to $2.5 million. You can use this money for working capital, inventory, equipment, real estate, or debt refinancing.

The VSBDC also provides specialized loans for agricultural businesses.

California Capital Access Program for Small Business

The California Capital Access Program for Small Business (CalCAP SB) operates a loan loss reserve program that can cover up to 100% of loan defaults. This program makes banks and other financial institutions more amenable to providing loans to small businesses.

You can use the funds obtained through this program to purchase land, renovate buildings, offset startup costs, purchase equipment or inventory, or as working capital. But there are a few restrictions: you can’t use the loan for bars, adult entertainment businesses, or gambling facilities.

Why Do You Need a Business Plan Before Applying for a Small Business Loan in California?

Business plan book with a person holding a pencil and a phone and cup of coffee sitting on the desk.

If you’ve heard rumors that the business plan is outdated, consider what it would look like to apply for a small business loan without one. You’d have no concrete research to support the validity of your idea. To a lender, this would seem like a reckless proposition.

Lenders don’t fund “pie-in-the-sky” business opportunities. You need a business plan if you need money to start your small business.

An official plan shows that you understand the importance of starting a new business venture, its challenges, and how to succeed.

What to include in your business plan

Business plans don’t have to be overwhelming, as they’re formulaic. Once you understand the formula, you just add in your information. Your plan will need the following components:

  • Executive summary
  • Company description
  • Market analysis
  • Organization and management
  • Service or product line
  • Marketing and sales
  • Funding requests
  • Financial projections
  • Appendix

How To Find the Right Lender for You

should explain how to find one and what to look for/important factors in getting a business loan

Search for the lenders that can offer you the best terms on a loan you can qualify for. Ultimately, you want the lowest costs for a loan amount you need. Also, consider other factors like funding speed. Luckily, you have many different options to choose from.

How can you find a lender? Your options are generally between online lenders, traditional banks, and microlenders. Here’s how to know which one is right for you:

Get a business loan from online lenders when:

  • You don’t have collateral
  • Your business is new
  • You need funding fast

Get business loans from banks when:

  • You have been in business for at least two years
  • You have good credit
  • You aren’t in urgent need of cash

Get a business loan from microlenders when:

  • You have poor credit or no credit history
  • You are a new business
  • You aren’t eligible for traditional loans

What To Do Next

Starting a new small business is equally exciting and overwhelming, and there’s a lot you’ll need to do. But it’s easy once you know the steps above and the following:

You can use the information in this article to register your California-based small business and get approved for small business loans that will help your company prosper.

Next, read how to start your online business.

Akshat Biyani Avatar
Scroll to Top