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Los Angeles Business Loans: Financing Options for LA Companies

Los Angeles Working Capital

California is home to many successful and well-known businesses around the world. With its diverse array of climates, people, and cultures, it remains to be a sought-after place for current and new establishments to call home. Moreover, the west coast is mainly known for its movie town, Los Angeles. While the SoCal region may only be one-third the size of Northern California, it contains the majority of the Golden States population, businesses, and industrial base. The Los Angeles County accounts for more of the state’s employment than any other region, coming in at 29.2%. Counties such as San Diego, Orange County, or Sacramento County, although less population-dense, are right behind. Thus, Los Angeles is home to the movie studios, television broadcasters, talent agents, and plenty of stars that make Hollywood an entertainment hub and what continues to influence its prevailing business climate.

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Although, Los Angeles is known for entertainment, there are a variety of other industries that have evolved and are becoming a strong representation in the region. We now see sizable growth in the healthcare sector over the last five years. This growth can be contributed from the rapidly aging California population, and even much more quickly in Los Angeles. Now, there are nearly 20 seniors for every 100 people of working age in the county, a ratio that has risen within the last few years and is predicted to double by 2040 since this is when the last of the baby boomers will reach retirement age. There has also been a drop in California’s 19 and under population that has dropped between 2011 and 2017, while their 64 and older contingent grew by close to 4%. As a result, the baby boomers have heightened the presence of the Nursing Care industry and the Home Care Providers industry in Los Angeles.

Contrastingly, to other industries and the prevailing culture of SoCal, hardnosed factory manufacturing work is also a lucrative and prominent industry that makes up the majority of its businesses in Los Angeles. The Aircraft, Engine, and Parts Manufacturing companies in Californian are fundamental in the region. Additionally, the area’s educated workforce along with its strong military presence have maintained a skilled workforce and stable demand, and add favorable weather to year-round outdoor testing making the location a perfect place for the industry. Correspondingly, these factors have encouraged 43.7% of the industry to locate their establishments in the county.

Subsequently, the construction industry has also experienced rapid growth in the last few years. This increase comes as a result of the existing inventory drying up and a recent increased growth with new entrants to the state. Furthermore, the average home price in California has also risen to an annualized rate of 8.6% over the last five years, compared to the national average of 6.5%. With California’s construction industry as a whole and recent trends—have caused the residential construction annualized rate to rise to 15.0%. Thus the new demand has generated an enormous gain to the Real Estate Sales and Brokerage industry. California alone and major cities such as Los Angeles are expected to account for 19.0% of the Real Estate industry’s national revenue. What also is apparent to most American citizens or assumed, is the higher than average income of west coast residents compared to other parts of the U.S. Thus allowing consumers to afford these more expensive homes and for businessmen and woman selling these homes have a promising and more consistent market.

Lastly, SoCal has become a force in the technology industry. It may not be Silicon Valley, but tech companies are still spawning success stories throughout the Los Angeles community. With startups like Oculus VR and Dollar Shave Club and one of the year’s most anticipated IPOs, it could be a defining moment for the region that is becoming a major tech destination. For example, favorite apps, such as Snapchat—the first Silicon Valley-scale company that’s been created in the L.A. area. Hence, the Venice-based Snapchat plans to go public with $25 billion valuations as early as March and would be the most significant offering of a U.S. tech company since Facebook’s 2012 debut. Also, famous companies such as Uber and Facebook has executives that have defected to Southern California as Silicon Valley struggles with their pricey cost of living and income gaps brought upon by fast-growing tech companies competing for highly skilled employees. Many bay area startups have packed up and headed for tech hot spots in Los Angeles, Venice, and Santa Monica. Even industry giants such as YouTube, Netflix, Facebook, Google, and Yahoo have opened up offices in the L.A. area hoping to capitalize on the area’s media and entertainment legacy. SoCal is a unique breed within the tech industry as it usually tends to focus on content creation instead of gadgets. Thus, with the help of companies like Snap making L.A. their home, the region is sure to keep thriving and closing the tech gap currently put in place by Silicon Valley.

Types of Los Angeles Business Loans

Nearly every Los Angeles company will seek some sort of debt financing at some point in time to help with acquisitions, refinancing of loans or other business debt, consolidation of business debt, purchasing real estate, refinancing business real estate, as well as a number of working capital issues. Knowing your options and finding the right loan for your Los Angeles business can potentially save you tens of thousands of dollars. Below we’ll take a look at some of the most common types of loans used by Los Angeles businesses.

Bank Loans

Bank lending is the most common financing option for Los Angeles business, both large and small. Bank loans are conventional loans amortized between 1-30 years used for a variety of business uses including purchasing businesses, refinancing business debt, consolidating debt, purchasing and refinancing real estate, as well as general working capital uses.

Rates 5-15%
Terms 1-30 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs

 

Bank Line of Credit

A bank line of credit is an affordable type of revolving funds provided by large banks, small banks, community banks and Los Angeles credit unions. A line of credit is a form of preapproved financing that the Los Angeles small business can access whenever they choose without having to get further approval from the lender.

Rates 5-15%
Terms 1-2 years
Funding Amounts $100,000-$5,000,000
Collateral Required
Fees Medium costs

 

SBA Loans

SBA lending is also another form of affordable financing provided by conventional lenders. The difference between a SBA loan and a traditional bank loan is that the majority of the SBA loan is guaranteed by the US Government. That means that should the Los Angeles business default on their SBA loan, the Small Business Administration will cover the majority of the SBA lender’s losses.

Rates 5-8%
Terms 3-25 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs

 

Unsecured Line of Credit

An unsecured line of credit is another form of preapproved funds the Los Angeles business can access whenever they choose. The difference between a bank line of credit and an unsecured line of credit is that a bank line of credit for Los Angeles businesses will be secured by business assets such as accounts receivable, real estate or inventory, whereas an unsecured line of credit doesn’t require collateral at all.

Rates 0% APR for 12 months
Terms 1-3 years
Funding Amounts $10,000-$500,000
Collateral Not required
Fees Medium costs

 

Equipment Leasing

A good option for Los Angeles businesses seeking equipment financing that don’t want to purchase equipment outright is to lease the business equipment. With equipment financing, a Los Angeles business can access equipment with as little as 10% down, and not have to pay the full-price of equipment, that may soon be outdated, upfront.

Rates 8-20%
Terms 1-10 years
Funding Amounts $10,000-$5,000,000
Collateral Required
Fees Medium costs

 

Asset Based Financing

Asset based lending (ABLs) is financing that uses collateral on the Los Angeles company’s balance sheet as the basis for financing. Common types of asset based lending include accounts receivable (A/R) lines of credit, and factoring (including both factoring lines and factoring of individual invoices).

Rates 8-25%
Terms 1-5 years
Funding Amounts $10,000-$5,000,000
Collateral Required
Fees Medium costs

 

Alternative Loans

Los Angeles alternative business loans may be a good financing option for companies seeking affordable financing but have been turned down by conventional and SBA lenders. Alternative non-bank financing has rates that are higher than conventional loans, but are certainly much more affordable than high-interest merchant cash advances.

Rates 10-25%
Terms 1-5 years
Funding Amounts $10,000-$500,000
Collateral Not required
Fees Medium costs

 

Merchant Cash Advance

A Los Angeles merchant cash advance is a type of financing that can be accessed by nearly any business that sees significant merchant credit card processing sales but is especially helpful for companies seeking working capital within a matter of days – or even the same day in some cases. A merchant cash advance isn’t a loan, but the sale of a Los Angeles business’s future merchant credit card receivables in order to access upfront cash for the receivables.

Factor rates 1.10 – 1.50
Terms 3-18 months
Funding Amounts $5,000-$500,000
Collateral Not required
Fees Low to High costs

 

ACH Cash Advance

A Los Angeles ACH business cash advance is a lot like a merchant cash in that it’s the sale of future business revenue to get an upfront sum of cash. The main difference is how the business repays the funding company. With a merchant cash advance, the funder will collect a percentage of each day’s credit card sales until the advance is repaid. But with an ACH cash advance, the funder is repaid by having a set amount of money sent to them each day directly from the business’s bank account using Automated Clearing House.

Factor rates 1.10 – 1.50
Terms 3-24 months
Funding Amounts $5,000-$2,000,000
Collateral Not required
Fees Low to High costs

Summary

Los Angeles business have no shortage of funding options to finance their businesses. In fact, there are dozens upon dozens of options available for nearly any business purpose. The key is to make sure you educate yourself as to the options, and then find the right lender. But finding the right lender isn’t necessarily an easy task. If you are a Los Angeles business seeking financing for your company, please reach-out to one of our funding specialists, and they’ll help you navigate the process.

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About the author
Domonique Cox

Domonique is a Minnesota native that earned her bachelors from The University of Arizona with a degree in English and Film Studies. Though books and writing are not her only interest, you can find her engaging in nutritional sciences, environmentalism, vegan cuisine, filmmaking, old school dancing, tennis, running, sound engineering, and enjoying satirical dark comedies or listening to the poetic lyrics of Bob Dylan. She is now based in Los Angeles as a content writer for GUD Capital where she spends her spare time honing her writing and directing skills. 

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