What You Need to Know About Getting a Business Loan in California

California has the largest number of small businesses than any other state in the U.S. at around 4.1 million businesses. This means that there are always opportunities for anyone to start their own ventures in the state.

But where do you get started? What if you need a financial jumpstart to get your business off on the right foot?

That’s what business loans are for. In this article, we’ll be covering when, why, and how you can get a business loan in California. Read on to find out more!

Why Should I Get a Business Loan in California?

The main benefit of business loans is that you can finance parts of your business without worrying about going under or taking it out of your own savings. Loans are effective and sustainable methods of keeping your business running.

While there are plenty of reasons to get a business loan in California, some people prefer alternatives. One such alternative is through investors.

There’s no doubt that investors can bring a lot to your business. However, with a business loan, you get more of an influence on how your business is run.

Banks typically don’t try to interfere with how you conduct business so long as you pay your fees on time. Investors put money into your enterprise with more influence in your decision-making.

Business loans are also straightforward. Those with good credit can obtain a loan without much hassle when compared to other methods.

Perhaps the biggest upside of business loans is that you won’t have to share your profits with any other investor. The money you make is yours to keep even as you pay off your loans.

When to Get a Loan in California

When you decide to get a business loan in California will depend on your situation. Not every business owner chooses to apply for one at the same time in their life.

Most, however, choose to get one when they’re starting a business. People need funds for things like equipment, office space, staff salaries, and inventory.

It’s essentially a small investment at the start of your business’s life. The plan is to make back the loan tenfold as your business takes off.

If you’ve already got an established business, you can expand it with business loans. You can expand outreach while providing more services, or maybe even open another location.

Maybe you’ve got a business running for a few years now but your equipment is breaking down. Business loans are excellent options for having the money to buy or fix equipment at your establishment.

How to Get a Business Loan in California

Interested in getting a business loan in California?

If so, you should know a few things about the entire process before jumping in. Getting business loans in California is all about knowing how you’re assessed and finding the right places to get approved.

1. Understand How You’re Assessed

One of the keys to getting a loan is knowing how lenders will view your application. That is, they determine whether you’re a credible business owner or borrower before they hand out any loans.

A big factor in this assessment is the credit score. This is mainly because your personal credit history illuminates how reliable you are with monthly payments.

While personal credit might seem arbitrary, it can determine whether a lender approves your loan application.

Cash flow is another key factor. Lenders need to know that you’ll have enough money each month to make a payment. Chances are, they’ll ask for past invoices and sales figures to determine this.

SBA lenders might also require collateral. Guaranteeing your loan with tangible assets might benefit your overall assessment during the application process.

This is all to say that you need to consider these factors before reaching out to any lenders. What can you organize about your business profile to make applying easier?

2. Decide What Type of Loans You Need

Choosing the business loan best fit for your business or your personal needs is important. The better the loans fit into your plans, the more successful you’ll be.

Small Business Administration Loans (SBA) are most common for incoming business owners. They provide favorable rates and repayment terms. It generally provides anywhere between $50,000 and $5 million.

You might opt for a traditional bank loan from a lender you’ve worked with for years. The number of loans can vary, as can repayment terms. The criteria for a loan might be more rigid than SBAs, but that’ll depend on the lender.

Online non-bank loans are also available for shorter application processes. These have higher APRs and you’ll need to prove a reliable cash flow.

3. Pick a Lender

Once you’ve decided what types of loans you need, it’s time to choose a lender. Most businesses will talk to direct lenders in California, who are organizations with no third-party intermediaries.

There are plenty of direct lenders in California, with many offering reliable SBA loan rates. Choose lenders based on their average interest rates and the amount they usually give out to small businesses.

The best direct lenders in California are ones that offer interest rates under 10%. They typically offer loans in the $100,000 to $1.5 million range. We have a reliable list of SBA lenders and the types of businesses they work with to help you out, and we also list the top metro small business lenders in cities such as Los Angeles, San Diego, San Francisco, and San Jose.

4. Gather Documents and Fill Out Applications

Now that you’ve decided which lenders to work with, it’s time to finalize your documents. Examples of documents you’ll need for loan applications include:

  • Business or personal credit scores
  • Tax returns
  • Bank account statements
  • Licenses and registrations
  • Other relevant financial documents

If you’ve prepared a report on your future cash flow and costs, that’s also valuable here. If you’re part of an underserved demographic, documents that prove that are vital.

All of these documents make filling out an application that much simpler. While the applications might take time to complete, the more information you have handy, the easier it’ll be.

Leverage Your Business Loan in California Today

Starting a business is no doubt costly, but California business loans alleviate these costs. Use this guide to help you get approved for a business loan in California today.

Looking for SBA loans in CaliforniaContact us today and we’ll help you find the right solution.