California Small Business Loan Guarantee Program
The California Small Business Loan Guarantee Program (SBLGP) works to help businesses create and retain jobs, while at the same time encouraging investment into low- to moderate-income communities. Business size eligibility for the SBLGP generally follows the U.S. Small Business Administration 7(a) program guidelines. The SBLGP provides loans to small businesses that experience capital access barriers. Through this program, a small business can establish a favorable credit history with a lender and obtain access to future loans on its own, independent of the program. Qualifying small businesses owners may apply for an SBLGP loan by contacting a Financial Development Corporation (FDC).
To find an FDC in your area, please click here and use the mapping tool.
Small businesses located in California may use funds for the following:
• Business Start-up costs
• Working capital
• Franchise fees
• Business expansion
• Lines of Credit
• Non-passive business real estate; new construction and renovations
• SBA 504 Bridge financing
• Refinancing of existing business debt (with conditions/original use of funds)
Non-profit organizations qualify for the guarantee provided the use is a business use (i.e., daycare, bookstore, clothing store).
Under this program, a financing institution, credit union, or Community Development Finance Institution makes a small business loan directly to a small business using a state guarantee to minimize their risk of capital. The Financial Development Corporation (FDC) issues a state guarantee up to 80%, and in some cases 90%, of the lender’s loan. Below is a summary of the process from the perspective of the participating lender and FDC:
- Lender underwrites the loan and requests the FDC for a loan guarantee.
- FDC reviews the lender write-up and loan package and does its own underwriting.
- FDC approves the guarantee and sends the lender’s Commitment Letter, Certifications, and Guarantee Agreement with Default Procedures.
- Lender executes Certifications; Borrower executes the Certifications.
- Lender executes Guarantee Agreement, Note, and Security Agreement.
- Lender disburses loan funds.
- Lender manages the credit and keeps FDC informed per Commitment Letter.
- Lender and FDC work together on any Work-Out or modification.
$2,500,000 for each borrower.
MAXIMUM LOAN AMOUNT
MATURITY OF GUARANTEE
Up to 7 years. The loan may be amortized over a term longer than the guarantee term.
Market rate as negotiated between lender and borrower.
Available business and personal assets (machinery, equipment, accounts receivables, inventory and real property).
The FDC guarantee fee is 2% of the guaranteed portion of the loan, plus $250 documents fee.
An FDC may participate in a direct lending program to small business. Currently, direct lending is limited and subject to program directives and requirements.
Surety Bond Guarantee
FDCs may act as a guarantor on surety bonds to assist with projects where the individual contractor is unable to secure bonding on their own. The surety bond guarantee may be funded through state or federal funding sources.
As a surety bond guarantor, an FDC will:
• Guarantee, endorse, or act as surety on the bonds, notes, contracts, or other obligations of a person, firm, corporation, or association.
• Establish and regulate the terms and conditions with respect to any such guarantees and the charges for interest and service connected therewith.
Requirements and Qualifications
Surety bond guarantees are limited and subject to program directives and requirements. To issue a surety bond guarantee, the FDC must first confirm the following.
- Low probability that the surety bond would be granted by a financial institution or financial company under reasonable terms or conditions.
- Beneficiary has demonstrated a reasonable prospect of successful completion of the project.
- Beneficiary has a minimum equity interest in the business as determined by the directives and requirements.
- Surety bond project coverage will be used exclusively in this state.
- As a result of the surety bond, the jobs generated or retained demonstrate reasonable conformance to the directives and requirements specifying employment criteria.
Disaster Loan Guarantee
Subject to IBank directives and requirements, an FDC may provide loan guarantees from funds allocated in Section 63089.55 to small businesses, small farms, nurseries, and agriculture-related enterprises that have suffered actual physical damage or significant economic injury as a result of the disaster.
Loan guarantees are limited to areas affected by a state of emergency within the state and declared a disaster by the President of the United States, the Administrator of the United States Small Business Administration, or the United States Secretary of Agriculture, or declared to be in a state of emergency by the Governor of California.
To issue a disaster loan guarantee, an FDC must determine that the following conditions are satisfied:
• The borrower cannot reasonably obtain a disaster loan without some form of
• The borrower has demonstrated a reasonable prospect of repayment.
• The guaranteed loan will be used exclusively in this state.
• The disaster loan qualifies as a small business loan or employment incentive
For further information, please contact:
Dan Apodaca, Assistant Program Manager
P.O. Box 2830
Sacramento, CA 95812-2830
Telephone: (916) 327-2028
FAX: (916) 322-6314