March 31, 2026
The California legislature is considering a bill, Assembly Bill 2116, that would require providers of commercial financing not already covered under the California Financing Law to register with the California Department of Financial Protection and Innovation. The bill would also add other restrictions on the provision of commercial financing in California.
The bill would require anyone who provides or offers to provide commercial financing products to California residents to register with the DFPI beginning on January 1, 2028. The bill would apply to a transaction with an amount financed of $500,000 or less for which a disclosure is required to be provided under California's commercial financing disclosure regulations. The bill would apply only where the recipient is a small business, i.e., a business with annual revenue no greater than $16 million (with the dollar threshold subject to adjustment every two years).
A.B. 2116 would add other requirements to the provision of commercial financing to small businesses. The bill would prohibit confessions of judgment, provisions for garnishment of recipients' money, and nondisclosure agreements regarding financing terms. It would also require a provider to display its average and maximum commercial financing APRs from the most recent calendar year on its website. Under the bill, any commercial financing transaction found to be unconscionable under California Civil Code, Section 1670.5, would be a violation of the California Consumer Financial Protection Law and subject to penalties under that law.