California merchant cash advance law: what your offer has to show
California requires a standard cost disclosure on most commercial financing offers of $500,000 or less, including merchant cash advances. The form has to show an estimated APR, the finance charge, the total you'll pay and how payments work. California courts also won't enter a confession of judgment. The rules come from the Financial Code and the DFPI's regulations.
Which offers the California law covers
The disclosure applies when a provider extends a specific commercial financing offer of $500,000 or less to a business in California. Sales-based financing, which includes most merchant cash advances, is covered. Banks and some other providers are exempt. The DFPI regulations set the exact format and how the estimated APR is worked out, using either the provider's historical method or its internal opt-in method.
The disclosure, line by line
Expect these lines, in this order, on a California sales-based financing disclosure:
| Line on the form | What it tells you | Check it against |
|---|---|---|
| Funding provided | The cash that reaches you after anything taken out | Your bank deposit on funding day |
| Estimated annual percentage rate | The yearly cost based on the provider's estimated term | The APR calculator with your own numbers |
| Finance charge | Everything you pay beyond the funding provided | Total payment minus funding provided |
| Estimated total payment amount | What you're expected to pay back in all | The purchased amount in the contract |
| Estimated payment | The daily, weekly or monthly amount | The ACH authorization |
| Estimated term | How long the provider expects repayment to take | Payback divided by payment |
| Prepayment | Whether any unpaid charges are still owed if you pay early | The contract's prepayment section |
Do brokers have to register?
California doesn't have a separate registration for merchant cash advance brokers under this law. A broker arranging commercial loans can need a California Financing Law license, and whether that reaches a sales-based deal depends on the facts. Ask any broker what license it holds, and check it on the DFPI's license search.
Confession of judgment
A judgment by confession can't be entered in any California court under Code of Civil Procedure § 1132. A contract can still name another state's law, so read the governing-law clause.
Where to raise a problem
File complaints about a provider or broker with the California DFPI.
Use the form to compare
Put the funding provided and estimated total payment from each offer side by side. The offer comparison tool takes those numbers directly.
Sources
- California Financial Code, Division 9.5 (commercial financing disclosures)
- California Code of Regulations, title 10, § 900 and following (DFPI disclosure rules)
- California Code of Regulations, title 10, § 940 (estimated APR)
- California Code of Civil Procedure § 1132 (confession of judgment)
This is general information, not legal advice. For your contract and your state, talk to a business lawyer. This page gets a legal review before it's indexed.
Funding a California business?
We check which funders fit and what the offer has to show before anything goes out. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.