California Small Business Loan Programs Get Federal Funding

California small business loan programs

Small business loan programs in California are funded by the federal government. The amount of $56 million was received by the state as a first payment last month. Basically, the total funds which can be got for such loan program comprise $168 million, according to the federal Small Business Jobs Act that has passed in September. In fact, the aim of this financing is to help back the loans to the small businesses which can’t get eligible for conventional cash loans.

Small Business Lending Programs In California

Budget cuts in recent years have slowed the state loan programs, like Small Business Loan Guarantee Program (SBLGP) and CA Capital Access Program (CalCAP). Following the terms and conditions of CalCAP program, the amount of money, that equals about 4 percent of a loan or an agreed portion of it, is put by the state into the bank account in a form of so-called loan loss reserve. Hence, if the loan fails, this reserve can be tapped by the bank. Besides, about 2 percent of  loan is contributed to the reserve by both the borrower and the bank.

Actually, the federal funding in the form of fast cash advance is aimed to be split between the two state programs and SBLGP puts $28 million into a trust fund that can help a lender pay off the loan issued by the program if it goes bad.

Funding In Three Payments

Under the Small Business Jobs Act, the state will be able to get a second amount of about $56 million only after it makes use of most portion of federal funding that was already received. Then, the final third payment can be received, if the second one is used.

The federal funding can play an important part in leading the state out of its economic downturn. It is really crucial for the businesses to get credit as it makes them able to cover operation costs and buy equipment.