Finances and Taxes

California Gets Federal Funding to Promote Small Business Growth

Paige Smith  
A woman works on a laptop

If you’re an established or aspiring business owner in California, the state has good news for you: California is about to receive a massive amount of federal funding to promote small business growth. 

Keep reading to learn more about the historic news and what it means for your business. 

What’s going on?

On September 21, 2022, the US Department of the Treasury announced their approval of California’s application for funding under the State Small Business Credit Initiative (SSBCI). California was approved to receive up to $1.1 billion in capital, the largest funding amount approved so far in the program.

SSBCI was initially created in 2010 to encourage entrepreneurship and increase access to business capital. The American Rescue Plan Act of 2021 restarted SSBCI, giving nearly $10 billion to states, territories, and Tribal governments to once again expand capital access and better support historically underserved communities.  

Why does the funding matter? 

Investing in aspiring entrepreneurs and small businesses can have a profoundly positive effect on the state’s economy. 

According to data from the Census Bureau, California ranked number one in the first half of 2022 for new business starts. Over 35,000 new businesses were started in California during that time, accounting for 11% of new businesses nationwide. And yet, the rate of new business creation in California is down 16% from the same period in 2021, suggesting that California entrepreneurs may not have the resources and support they need. 

More small business funding, however, means small businesses across all industries have a better chance of getting off the ground and growing successfully. With the $1.1 billion in SSBCI funding, California aims to: 

  • Push for equitable economic growth among small businesses
  • Lower barriers to capital access for underserved communities 
  • Provide key investments to small businesses
  • Create more jobs in neighborhoods and communities 
  • Strengthen local and state economies 
  • Uplift businesses that have been socially and economically disadvantaged after the pandemic

How will California allocate the funds?

California will receive the funds over a period of eight years in three separate installments, the first of which was September 16, 2022. There are several programs California is implementing with the new funds, all of which fall into one of two categories: capital access programs (CAPs) and Other Credit Support Programs (OCSPs).

  1. Capital access program (CAP): Over $118 million will go to a capital access program that will help cover potential losses on small business loans. 
  2. Small business loan guarantee program: Over $390 million will go to a small business loan guarantee program that will give underserved communities easier access to capital. 
  3. Collateral support program: Over $472 million will go toward providing collateral for small business loans, so businesses can obtain financing more easily. 
  4. Expanding venture capital access program: Over $200 million will go toward venture capital programs designed to give investments to small businesses, partly by supporting first-time and underrepresented fund managers who have a track record of prioritizing underserved operations. 

Who will administer the programs?

The California Infrastructure and Economic Development Bank (IBank), which is an agency of the Governor’s Office of Business and Economic Development, will administer the state’s loan guarantee and venture capital programs. Meanwhile, the California Pollution Control Financing Authority (CPCFA), an authority of the State Treasurer’s Office, will handle the capital access and collateral programs.

Who qualifies for the programs? 

Here are the current eligibility requirements and details for the capital access, loan guarantee, and collateral programs: 

California’s Capital Access Program (CalCAP) 

Requirements
  • Must be classified as a small business by the Small Business Administration (SBA)
  • Must have between one and 500 employees
  • The business must be a California business
  • Business must be eligible under the program and in one of the industries listed in the North American Industry Classification System (NAICS) codes list
Loan amountUp to $2.5 million of a $5 million loan may be enrolled
Loan uses
  • Working capital
  • Inventory purchases
  • Equipment purchases
  • Start-up costs
  • Capital/growth projects
  • Land acquisition
  • Construction
  • Renovation

Small Business Loan Guarantee Program

Requirements
  • Must be classified as a small business by the Small Business Administration (SBA) or be an eligible nonprofit
  • Must have between one and 750 employees
  • The business must be a California business
  • Business must be eligible under the program and in one of the industries listed in the North American Industry Classification System (NAICS) codes list
Loan amountLoans of up to $20 million; max guarantee is 80% of loan up to $2.5 million
Loan uses
  • Working capital
  • Inventory purchases
  • Start-up costs
  • Business expansion
  • Agriculture
  • Construction
  • Lines of credit

Collateral Support Program

Requirements
  • Must be classified as a small business by the Small Business Administration (SBA)
  • Must have between one and 750 employees
  • The business must be a California business
  • Business must be eligible under the program and in one of the industries listed in the North American Industry Classification System (NAICS) codes list
Collateral amount
  • For loans of $50,000 – $250,000: cash pledge of up to 40% of the loan amount, plus 10% if business is located in a severely affected area (SAC)
  • For loans of $50,000 – $2 million for green or manufacturing businesses: cash pledge of up to 40% of the loan amount, plus 10% if business is located in an SAC
Loan uses
  • Working capital
  • Inventory purchases
  • Capital projects
  • Equipment purchases
  • Start-up costs
  • Land acquisition
  • Construction
  • Renovation
  • Agriculture
  • Bridge loans

When do the programs start? 

The programs are still getting up and rolling, though some of them are accepting applicants. Currently, IBank and CPCFA are enrolling lenders in the loan guarantee program, capital access program, and collateral program. IBank estimates that the venture capital program will be live in late 2022. 

In the meantime, you can: 

Other resources for California business owners

If you own a business in California—or are thinking about starting a business—here are some resources that can help you along the way:

Paige Smith
Paige Smith Paige is a content marketing writer specializing in business, finance, and tech. She regularly writes for a number of B2B industry leaders, including fintech companies and small business lenders. See more of her work here:
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