This is a plain-English summary for business owners, not legal advice. Laws and regulations change. Check the statute and the regulator's guidance, or ask an attorney, before relying on it.
At a glance
| Law | California Commercial Financing Disclosure Law (SB 1235) |
|---|---|
| Citation | Cal. Fin. Code §§ 22800–22805; DFPI regulations |
| Applies from | December 9, 2022 |
| Deal size covered | $500,000 or less |
| Products covered | Commercial financing including loans, open-end credit, sales-based financing (merchant cash advances) and factoring |
| Estimated APR required | Yes |
| Regulator | Department of Financial Protection and Innovation (DFPI) |
Key points
- Providers must disclose an estimated annual percentage rate on covered offers, one of only two states that require it.
- Transactions over $500,000 and real-estate-secured commercial financing are outside the law.
- A later amendment (SB 362) requires that when a provider expresses the cost as a rate, it uses the APR rather than another rate measure.
What this means when you're comparing offers
Covered offers in California must show an estimated APR, so you can compare a merchant cash advance, a short-term loan and a line of credit on the same scale. It's still worth checking the number yourself: for sales-based products the APR depends on the provider's forecast of your sales, and a different forecast gives a different APR.
Take the amount disbursed (after fees), the total repayment and the payment schedule from the disclosure and enter them in our merchant cash advance calculator or loan comparison calculator. If your result is far from the disclosed APR, ask the provider which payment schedule they assumed.
What a disclosure typically shows
The exact list varies by state and product, but commercial financing disclosures generally cover the total amount of financing, the amount actually disbursed after fees, the finance charge or total cost, the total repayment amount, and the payment amount and frequency. Check the statute cited above for California's precise requirements.
If an offer is covered and you weren't given a disclosure, ask for one before signing. If a provider refuses, treat it as a warning sign.
Other states
See all state commercial financing disclosure laws, including which require an APR and how deal-size limits compare.
Sources
- California SB 1235 bill text (accessed 2026-09-26)
- Venable LLP, State Commercial Financing Disclosure Laws (March 2026) (accessed 2026-09-26)