OpenbookCapital
Check my options

How we work

How it worksEvery step and how long it takes The Openbook StandardWhat we promise on every offer

Company

About Openbook PartnersRefer clients, or fund with us Careers

Get in touch

Contact Request a callPick a time that suits you
We're a broker, not a lender

Funders make the credit decisions. We compare their offers and show you what each one costs. Funders pay us when a deal funds, never you upfront.

Read the standard

California · In effect

California: Commercial financing disclosure law (SB 1235)

California requires a standard cost disclosure, including an estimated APR, for commercial financing offers of $500,000 or less, and has since December 9, 2022. Merchant cash advances are covered as sales-based financing. Later laws made the APR permanent, limited certain fees and, from January 1, 2026, require the APR whenever a provider quotes a price during the application.
In effect
2022-12-09
Deal size covered
Offers of $500,000 or less
Estimated APR
Required
Registration
Not required

What it means for you

If your business is run from California, an MCA offer of $500,000 or less should come with a DFPI-format table showing the funding provided, the finance charge, the estimated total payments, the estimated term and an estimated APR. You sign it before the deal closes. If a provider quotes a charge or pricing figure during the application, it must state the APR too. The law does not cap MCA pricing.

Law
Commercial financing disclosure law (SB 1235)
Citation
Cal. Fin. Code §§ 22800–22807; Cal. Code Regs. tit. 10, §§ 900–956
Enacted
2018-09-30
Effective
2022-12-09
Regulator
California Department of Financial Protection and Innovation (DFPI)
Who it covers
Providers that extend specific offers of commercial financing to businesses principally directed or managed from California. Covered products include sales-based financing (merchant cash advances), commercial loans, open-end credit, factoring, lease financing and asset-based lending. Brokers have delivery duties under the DFPI rules.
Registration
None under the disclosure law. Under DFPI rules in effect since October 1, 2023, businesses that offer commercial financing to California small businesses, nonprofits and family farms file an annual report with the DFPI by March 15 (first report due March 15, 2025).
Brokers
A broker must send you the funder's disclosure unaltered before communicating the offer and give the funder evidence of when it did. SB 666 (2023) also bars providers and brokers from charging California small businesses certain fees.

What must be on the disclosure

  • Funding provided
  • Estimated annual percentage rate (APR)
  • Finance charge
  • Estimated total payment amount
  • Estimated payment amount and frequency
  • Payment terms
  • Estimated term
  • Prepayment terms, including any prepayment charges
  • Average monthly cost, for financing without monthly payments

What a California MCA offer must show

A sales-based financing offer comes with a DFPI table that states the cost in dollars and as an estimated APR.

Under 10 CCR § 914, the table covers the funding provided, the estimated APR, the finance charge, the estimated total payment amount, the estimated payment, the payment terms, the estimated term and prepayment terms. Financing without monthly payments also shows an average monthly cost.

The APR and term are estimates because MCA payments follow sales. You sign the disclosure before the deal is consummated, and an electronic signature counts. A broker cannot sign it for you.

The rules apply when your business is principally directed or managed from California.

APR and fee rules added since 2023

California made the APR permanent, limited some fees and now ties the APR to price quotes during the application.
  • SB 33 (2023). The APR disclosure was due to end on January 1, 2024. This law kept it in place indefinitely.
  • SB 666 (2023). Providers and brokers may not charge a California small business certain fees, such as a fee to process an ACH payment other than a failed one, a fee for a payoff statement, or collateral monitoring fees unless the account is more than 60 days delinquent. SB 1521 (2024) added exceptions.
  • SB 362 (2025, in effect January 1, 2026). A provider may not use "interest" or "rate" in a deceptive way. When it states a charge, pricing metric or financing amount for a specific offer during the application, it must also state the APR.

For SB 666, a small business is one with its principal office in California, 100 or fewer employees and average annual gross receipts of $15 million or less, among other tests.

Broker duties and annual reports

Brokers must deliver the funder's disclosure unchanged, and commercial financing providers report to the DFPI each March.

Under 10 CCR § 952, a funder that gives a broker an offer must also give the broker compliant disclosures. The broker must send them to you unaltered before communicating the offer and give the funder evidence of the time it did so. The rule does not make the broker responsible for the funder's numbers, and the California disclosure table has no line for broker compensation.

Under DFPI rules in effect since October 1, 2023, businesses that offer commercial financing to California small businesses, nonprofits and family farms file an annual report by March 15. SB 362 also confirms the DFPI can enforce the disclosure rules under the California Consumer Financial Protection Law against providers that are not licensed under the California Financing Law.

What the California law does not do

It governs disclosure and some fees; it does not cap prices or license MCA funders.
  • It does not set a maximum factor rate, fee or APR for MCAs.
  • The disclosure law does not create a license or registration for MCA providers or brokers.
  • It does not cover offers over $500,000 or businesses that are not principally directed or managed from California.
  • The APR is an estimate. The cost you actually pay depends on how fast the advance is repaid.

This page is general information, not legal advice.

Who is exempt

Deals and providers the law doesn't reach.
  • Depository institutions, such as banks
  • Lenders regulated under the federal Farm Credit Act
  • Financing secured by real property
  • Certain financing to vehicle dealers and vehicle rental companies
  • A person making no more than 1 commercial financing transaction in California in 12 months, or 5 or fewer that are incidental to its business
  • Offers over $500,000

Questions

Does California's law cover merchant cash advances?

Yes. DFPI rules include sales-based financing, defined as financing repaid as a percentage of sales or income where the payment rises and falls with sales volume. The law applies to offers of $500,000 or less to businesses principally directed or managed from California.

Does a California funder have to show an APR?

Yes. The disclosure includes an estimated APR, and SB 33 made that requirement permanent in 2023. Since January 1, 2026, a provider that states a charge, pricing metric or financing amount for a specific offer during the application must also state the APR.

Who enforces California's commercial financing rules?

The DFPI. Violations by providers licensed under the California Financing Law are treated as violations of that law, and SB 362 confirms the DFPI can act under the California Consumer Financial Protection Law for other providers.

Does a California MCA disclosure show what the broker is paid?

No. The California disclosure table has no broker compensation line, and the broker rule in 10 CCR § 952 covers delivering the funder's disclosure unaltered. New York, Virginia, Connecticut and Texas do require broker pay to be disclosed.

Sources

  1. California Financing Law: Commercial Financing Disclosures — California DFPI (checked 2026-09-30)
  2. California Financial Code, Division 9.5 (§§ 22800–22807) — California Legislative Information (checked 2026-09-30)
  3. DFPI's commercial financing disclosure regulations approved to become effective as of December 9, 2022 — California DFPI (checked 2026-09-30)
  4. Cal. Code Regs. tit. 10, § 914: Sales-based financing disclosure formatting and contents — Cornell LII (CCR text) (checked 2026-09-30)
  5. Cal. Code Regs. tit. 10, § 920: Signatures — Cornell LII (CCR text) (checked 2026-09-30)
  6. Cal. Code Regs. tit. 10, § 952: Duties of financers and brokers — Cornell LII (CCR text) (checked 2026-09-30)
  7. Cal. Code Regs. tit. 10, § 954: Recipient's relationship to California — Cornell LII (CCR text) (checked 2026-09-30)
  8. Senate Judiciary Committee analysis of SB 362 (existing law, exemptions) — California State Senate (checked 2026-09-30)
  9. SB 33 (2023), Chapter 376, chaptered text — LegiScan (copy of chaptered bill) (checked 2026-09-30)
  10. SB 666 (2023), Chapter 881, chaptered text — LegiScan (copy of chaptered bill) (checked 2026-09-30)
  11. SB 362 (2025), Chapter 352, chaptered text — LegiScan (copy of chaptered bill) (checked 2026-09-30)
  12. Summary of chaptered and vetoed legislation, 2025 (SB 362) — California State Senate (checked 2026-09-30)
  13. DFPI Monthly Bulletin, January 2026 (SB 362 in effect January 1, 2026) — California DFPI (checked 2026-09-30)
  14. Highlights of 2024 Chaptered Legislation (SB 1521) — California DFPI (checked 2026-09-30)
  15. CCFPL commercial financing annual report information — California DFPI (checked 2026-09-30)
  16. SB 1235 (2018), Chapter 1011: bill status — LegiScan (checked 2026-09-30)

Last reviewed 2026-09-30. General information, not legal advice. Laws and regulations change; confirm with the regulator or an attorney.