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 andgrowing 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).
Capital access program (CAP): Over $118 million will go to a capital access program that will help cover potential losses on small business loans.
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.
Collateral support program: Over $472 million will go toward providing collateral for small business loans, so businesses can obtain financing more easily.
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 amount | Up 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 amount | Loans 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:
Reach out to the financial institutions you work with to request that they join the state programs.
Contact a participating CalCAP financial institution to learn more about your options and get started.
For more information about the loan guarantee program, contact the IBank Small Business Finance Center Team.
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:
The California Dream Fund: This grant program awards microgrants of up to $10,000 to eligible first-time entrepreneurs and small business owners who complete an intensive training program under the Technical Assistance Expansion Program (TAEP). See a list of particulating technical assistance centers.
The California Rebuilding Fund: This loan program was created to close the capital gap for small businesses, especially those in economically distressed areas of the state. Learn more about the eligibility requirements and loan terms.
California Office of the Small Business Advocate: This office supports entrepreneurs and business owners at every stage of their growth. You can contact a small business advisor, gather tips and advice from resource articles, or get matched with a local assistance center.
Local grant and loan programs: Your local city or county may be offering small business loans or grants. For more information, contact your local technical assistance center to get started.
