STATE COMMERCIAL FINANCING LAW
California Commercial Financing Law
SB 1235 (2018) · SB 362 (2025) · AB 2116 (2026) · Cal. Fin. Code §22800 et seq. + CFL
At a glance
Status: Law enacted
Signed: Sep 30, 2018 (SB 1235) · Sep 30, 2026 (AB 2116)
Effective: Dec 9, 2022 (disclosures) · Jul 1, 2028 (CFL licensing)
Who it covers: Broad — loans, MCA/sales-based, factoring, open-end, asset-based, leases
Size cap: $500,000 or less
Regulator: CA Dept. of Financial Protection & Innovation (DFPI)
Type of rules: APR disclosure · Broad coverage · Licensing / rate cap · Broker rules
Key requirements
First-in-the-nation commercial financing disclosure law; detailed DFPI regulations specify formatting down to fonts and column widths.
APR must be disclosed, calculated under prescribed methods, including estimated APR for sales-based financing.
SB 362 (effective Jan 1, 2026): providers must restate APR whenever they quote a charge, pricing metric, or financing amount, and may not use "rate" or "interest" in a misleading way.
AB 2116 (signed Sep 30, 2026 — eight years to the day after SB 1235): both providers AND brokers of commercial financing — MCA, factoring, receivables purchases, asset-based lending, leases, loans — must hold a California Financing Law license by Jul 1, 2028 on covered deals of $500K or less. The biggest commercial financing licensing regime in the country.
Under AB 2116, unlicensed financing agreements are unenforceable, licensees must perform an ability-to-repay analysis, confessions of judgment are barred, and brokers must post their average and maximum APRs on their websites.
The broker definition is broad: transmitting a merchant’s data to a provider with the expectation of compensation counts as brokering.
The provider must obtain the recipient’s signature on the disclosure before the transaction can close.
DFPI is actively enforcing — including a Nov 2025 consent order against a provider that skipped required disclosures.
What to watch
Watch items: a drafting quirk leaves deals made Jan 1 – Jul 1, 2028 in enforceability limbo unless the legislature cleans it up, and filing a complete license application by Jul 1, 2028 lets a company keep operating while it is pending. Court history: the SBFA sued DFPI over the APR rules; a federal judge ruled for DFPI in Dec 2023.
California coverage from Funder Intel
Sep 30, 2026 Newsom Signs AB 2116: California Will License Commercial Finance — Here's Who's Already on a State Registry
Aug 24, 2026 California AB 2116 Clears Legislature, Setting Up Licensing for Commercial Finance Providers and Brokers
Sep 1, 2024 Debt Collection: Understanding California’s Proposed Expansion of the RFDCPA
Jun 8, 2024 California SB 1482: What Commercial Finance Providers Need to Know
Apr 27, 2024 California Launches Loan Match to Connect Small Businesses with Trusted Lenders
Dec 22, 2023 Are You Ready for These New Laws Jan 1, 2024?
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Last verified October 2026. Compiled and verified by Funder Intel for general industry information. This is not legal advice. Laws change often, so check the statute and a qualified attorney before making compliance decisions.