How California Small Business Owners Are Leading Economic Growth

small businesses thrive with 504 loans in California

California leads the nation with the largest economy and local market of any state. In fact, if it were its own country, it would have the sixth largest economy in the world. Small business is a huge part of that economy. It makes up the overwhelming majority of businesses in the state and employs millions of people. The state’s wellbeing depends on it.

A Look at California’s Small Businesses

The Small Business Administration (SBA) Office of Advocacy creates an annual profile of small business in each state in the country, and California’s is captivating to read. It paints a picture of a vibrant economy in which small business plays a leading role. Here are a few of the most impressive statistics:

  • 99.8% of California businesses (3.8 million) are small businesses
  • 95.9% of California exporters are small businesses
  • 49.2% of California employees (6.8 million people) are employed by small businesses
  • 197,532 net new jobs are created by small businesses in one year in California

The secret to California’s success is not hard to find. Business News Daily did a state-by-state profile of small business in 2016. It found that small business is thriving in California and identified three big reasons why:

  • Proximity to Silicon Valley and Hollywood means large, concentrated markets made up of innovative, highly trained specialists
  • Strong economic recovery encourages entrepreneurs and niche businesses
  • A large population and relatively wealthy residents support a wide range of services

These traits describe businesses that cater to specialized markets that are upscale and prestigious. They describe an essential part of California’s identity: glamour. Businesses like TMC Financing clients Thud Studios, a music production facility in North Hollywood, or custom furniture maker L’Artigiano Studio, also based in North Hollywood, epitomize this trait, summoning up images of musicians and soundtracks, and ultra-luxurious offices. That is only a small part of the picture of California small business though.

Who Is Behind These Small Businesses?

California has the largest population of any state. More than one in ten Americans is a Californian! Based on the previous percentages, this means that about one in twenty American workers is an employee of a California small business. But who are these small business owners?

The SBA breaks down demographic statistics to show how many small businesses are owned by members of demographic groups. There are 9 small businesses owned by women for every 100 women in California. For minorities, it is 10 per 100, and 13 per 100 for veterans.

There is no sector of the California economy where small business is not present. Even utilities—which are usually thought of as the biggest of big businesses—have over 2,000 active small businesses. By industry, the greatest number of small businesses are professional, scientific and technical services, totaling 649,955 businesses—55% of all businesses in that category in the state. The industry most heavily dominated by small business is construction, where 291,632 businesses account for 84% of that sector of the state’s economy, with over half a million employees.

These are companies like All-Cal Insurance Agency, a multi-service insurer, licensed in three states, that specializes in nonprofits. TMC helped them buy their office in Roseville. Another is Roebbelen Contracting, Sacramento’s largest locally owned commercial construction company, with more than 275 employees, which is responsible for building some of the region’s best institutional facilities. TMC helped finance their new headquarters as well.

What Holds Small Business People in California Back?

Despite their market share domination, small businesses still face many struggles in California. CNBC gave California a mediocre ranking of 28th in its 2017 America’s Top States for Business list, up from 32nd last year. There are several reasons for this.

Of the 10 criteria used, the state received high marks for Access to Capital (1st) and Technology and Innovation (2nd). However, venture capital is often available only to a very narrow set of recipients. A recent article in Fast Company magazine, for example, documents how only 5% of venture capital goes to women business owners and only 1% to African-American and Latino business owners.

CNBC ranked California rock bottom for Cost of Living (48th) and Cost of Doing Business (49th). Why is this? Taxes in California are a mixed bag, one small businessman told Business News Daily. “California is active in legislation and actively involved in the business climate,” he said. “Sometimes those decisions are good for certain businesses, and sometimes they’re bad.” 

The high cost of living is reflected in high wages. California has instituted a gradual minimum wage increase that provides all workers with a minimum wage of $15 an hour by January 1, 2023.

Consider an SBA 504 Loan

If you are one of those intrepid small business owners driving the California economy and you want to buy a property, look at the SBA 504 loan. A 504 loan can be used for:

  • the purchase of land or buildings
  • the construction of buildings
  • the purchase of equipment with a service life of ten years or more
  • improvement, upgrading or renovation of commercial land, buildings or equipment

The 504 loan program is administered by Certified Development Companies (CDC), and loans are granted in conjunction with a conventional lender, such as a bank or credit union. Your CDC can help you find a lender to partner with for the loan, if you want. The conventional lender provides 50% or more of the total. Your CDC facilitates the SBA loan for up to 40% of the project cost, or $5 million ($5.5 million for manufacturing projects or if the project includes energy-efficiency measures).

If you are interested in a 504 loan, or have questions about it, do not hesitate to contact TMC Financing. TMC’s 504 loan experts will be happy to answer all of your questions, as well as to help guide you through the 504 loan process. TMC Financing has over three decades’ experience providing 504 loans and is a high-volume Premier Lender with the SBA.

Barbara Morrison

Barbara Morrison

Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison