California Commercial Financing Disclosure Law: Requirements and Exemptions

California’s commercial financing disclosure law requires non-bank providers to give a small business borrower a written, standardized cost-and-terms disclosure before closing any commercial financing offer of $500,000 or less. The rules come from Senate Bill 1235 (2018), were strengthened by SB 33, and are enforced by the Department of Financial Protection and Innovation (DFPI) under implementing regulations that dictate both the content and the exact format of the disclosure document.

The Six Items That Must Appear on the Disclosure

At the time a specific financing offer is extended, the provider must give the borrower a written disclosure covering six categories:

Total funds provided: the dollar amount the borrower actually receives or that is disbursed on the borrower’s behalf.
Total dollar cost of the financing over its life.
Term or estimated term, stated in days if one year or less, or in years and months if longer.
Payment details: method, frequency, and amount.
Prepayment policies, including any charges or restrictions tied to early payoff.
Annualized rate, expressed as a percentage.

The annualized rate was originally set to sunset on January 1, 2024. SB 33 removed that expiration, so the annualized rate is now a permanent part of the required disclosure.¹

If the amount financed is larger than the funds the borrower actually receives, because fees or other charges were rolled in, the provider must attach a separate itemization breaking down how the money was allocated.

Which Financing Products Are Covered

The statute defines commercial financing broadly. It includes commercial loans, accounts receivable purchase transactions (including factoring), asset-based lending, commercial open-end credit plans, and lease financing, so long as the financing is intended primarily for business rather than personal use.²

The DFPI regulations add a separate disclosure table for sales-based financing, where repayment is calculated as a percentage of the borrower’s future revenue or sales. That category captures most merchant cash advance products.³

Factoring and asset-based lending get a practical concession. Where a provider offers a general agreement describing the terms under which future transactions will occur, the disclosure may be drafted using an example transaction rather than actual figures, because the final amounts depend on which receivables or assets are involved.⁴

The $500,000 Threshold

Disclosures are only required when the specific offer is $500,000 or less. A recipient under the statute is a person presented with an offer at or below that amount.² For open-end credit plans, the approved credit limit determines whether the offer falls below the threshold. For asset-based lending and factoring, the regulations include detailed rules for measuring whether the expected outstanding balance will exceed $500,000.³ If it does, the law does not apply.

Who Counts as a Provider

The disclosure obligation falls on the entity extending the financing offer. That typically means the lender or originator, and it also includes a non-bank partner in a marketplace lending arrangement that facilitates the deal through a financial institution. Brokers who connect borrowers with lenders are not directly defined as providers under the statute, but the provider remains responsible for making sure the borrower receives the required disclosure regardless of who introduced the deal.

Who Is Exempt

Several categories fall outside the law entirely under Financial Code section 22801:

Depository institutions, including banks, savings associations, and credit unions.
Lenders regulated under the federal Farm Credit Act.
Any commercial financing transaction secured by real property.
Financing of $50,000 or more to auto dealers, vehicle rental companies, or their affiliates.
Infrequent providers, meaning anyone making one or fewer commercial financing transactions in California in a 12-month period, or five or fewer where the transactions are incidental to the provider’s main business.

The depository institution exemption is the most significant in practice. The law targets non-bank lenders, fintech companies, and alternative financing providers rather than chartered banks.⁵

Format and Timing Rules

The DFPI regulations prescribe the exact layout. Each disclosure opens with a bold “OFFER SUMMARY” header followed by a short product description, and the regulations lay out different required table structures for closed-end loans, open-end credit plans, factoring, sales-based financing, lease financing, and asset-based lending.³

Font requirements are specific: Times New Roman, 12- to 14-point for the main columns, 16-point for the header. Columns must follow a 3:3:7 width ratio. Electronic disclosures are permitted, but they must include a method for electronic signature and an automatic date stamp.

Timing is tied to the offer itself. The provider must deliver the disclosure when it extends a specific offer, and the borrower must sign it before the provider closes the deal.⁶ If a transaction falls through and is never consummated, no signature needs to be collected.

The disclosure must carry this statement: “Applicable law requires this information to be provided to you to help you make an informed decision. By signing below, you are confirming that you received this information.”³

Annual Reporting Under the CCFPL

Providers face a separate annual reporting obligation under the California Consumer Financial Protection Law. In 2023, California adopted regulations defining unfair, deceptive, and abusive practices in commercial financing and requiring providers to report their activity annually.⁷

The report is due by March 15 each year, covering the prior calendar year. No extensions are granted. Providers report the total number and dollar volume of transactions across each financing category, along with minimum, maximum, average, and median APR figures for different amount-financed intervals.⁸ Providers operating from multiple locations must consolidate everything into a single report. Missing the deadline is itself a CCFPL violation and can trigger penalties.

Enforcement and Borrower Remedies

The DFPI enforces the disclosure law through the California Financing Law framework. Providers licensed under that framework are subject to examination and enforcement by the DFPI commissioner for any violation of the commercial financing disclosure requirements.⁹ Available tools include administrative actions, civil injunctions with ancillary relief, and civil penalties. A willful violation is treated as a crime.⁶

One thing the law does not clearly provide is a private right of action for borrowers. Enforcement runs through the DFPI, not through individual lawsuits. A borrower who receives no disclosure or a defective one can file a complaint with the DFPI, which may investigate and act against the provider, but the statute does not expressly grant borrowers the right to sue for rescission or damages based solely on a disclosure violation. For borrowers relying on the law, the primary remedy is a regulatory complaint.

1
California Legislative Information. California Bill Comparison – SB-33 Commercial Financing Disclosures
2
California Legislative Information. California Financial Code 22800
3
Department of Financial Protection and Innovation. Commercial Financing Disclosure Regulation Final Text
4
Department of Financial Protection and Innovation. California Financing Law – Commercial Financing Disclosures
5
California Legislative Information. California Financial Code 22801
6
California Legislative Information. California Bill Text – SB-1235 Commercial Financing Disclosures
7
Department of Financial Protection and Innovation. California Consumer Financial Protection Law – Commercial Financing Annual Report Information
8
Department of Financial Protection and Innovation. CCFPL Commercial Financing Annual Report Form
9
Department of Financial Protection and Innovation. Department of Financial Protection and Innovation – Consumer and Commercial Loans