Data Center Feasibility Study in California

First in the country, but mostly hosting firms

No state approved more SBA loans in the data center class than California: its 113 approvals from FY2017 to FY2026, worth $64.9 million, rank 1 of 52 states. That headline needs a careful reading. The code behind this class also covers data processing and web hosting businesses, and a colocation building cannot be told apart from a hosting service, so most California borrowers here are likely technology service firms rather than owners of powered shell buildings. The loan sizes support that reading. The California median was $255,800, which is 1.24x the national data center median; set against California's all-class lending and against the class countrywide, it clears our distinctness margin on both sides. It is the measure this page is built on.

California's middle half of data center loans spans $150,000 to $486,800, sums that buy servers, network gear, working capital or a small business, not a facility. SBA 7(a) carried 103 approvals and SBA 504 just 10, and franchising does not appear, at 0.00%. Volume is ordinary for the state's size: the location quotient is 0.93x, and the class ranks only 26 of 39 among California classes. Lending is spread thin. BayFirst National Bank holds 9 of these California loans, and Newtek Bank, National Association, Northeast Bank and Wells Fargo Bank National Association hold 8 each, though the 8 held by Newtek Bank, National Association total $8.6 million, against $894,300 for the 8 at Wells Fargo Bank National Association; Bank of America, National Association holds 7. Los Angeles County leads with 25 approvals, then San Diego with 15, Orange with 12 and Santa Clara with 10. FY2024 was the busiest year, with 22 loans for $14.8 million.

How California data center loans have fared

Cancellations are light here. California cancelled at least 5.7% of the class's FY2017 to FY2024 approvals, and 6.8% at the ceiling once undisbursed loans count as cancelled. Losses are heavier. Of 50 California loans disbursed in FY2017 to FY2021, 6.0% have been written off so far, and 4.0% went bad inside five years. Both are floors.

What a California data center study has to answer

The first job of a study is to say which business is being financed. For a hosting or managed-services firm, demand means contracted customers, churn and pricing against cloud providers, and debt service coverage rests on recurring revenue net of power and bandwidth. For a colocation or edge facility, demand means leasable power and rack commitments in a specific market such as Los Angeles or Santa Clara, and cost means power delivery, cooling, redundancy and the building, at current California utility rates and interconnection timelines. A lender near $486,800 needs coverage shown on signed revenue. The appraisal question differs too: equipment depreciates fast, so collateral for most of these loans is thin, while a facility needs a value that reflects its specialised use.

These California figures cannot separate colocation buildings from hosting services, because both sit in one code with data processing businesses.