California Commercial Financing Disclosure
California's Commercial Financing Disclosure Law (SB 1235, effective 2018, with regulations finalized 2023) requires commercial financing providers — including MCA funders — to provide standardized cost disclosures to California-based merchants prior to executing financing agreements.
Why This Matters
California's law preceded New York's but final regulatory implementation lagged. Effective December 2022, the law requires APR disclosure (using a defined formula), total funding amount, total dollar cost, payment frequency and amount, and prepayment terms. Notably, California's APR calculation methodology differs slightly from New York's, requiring funders operating in both states to maintain dual disclosure systems. Some MCA funders have restricted California marketing rather than navigate the disclosure regime; others have invested in compliant disclosure infrastructure as a competitive moat.
Frequently Asked Questions
Frequently Asked Questions
What MCA financing thresholds trigger California disclosure requirements?
Currently applies to commercial financing of $500,000 or less to California-based businesses. Above $500K, the disclosure regime does not apply — bridging point for many high-ticket commercial finance products that escape the regulation.
How does California's APR formula differ from NY's?
California uses a slightly different annualization methodology and treatment of fees. For most MCA structures, the calculated APRs are within a few percentage points but not identical — funders maintain dual calculation engines for cross-state operations.