California Enacted New Rules for Commercial Financing
Business owners in California will see increased oversight of commercial financing and lending products starting in 2028.
Updated on Oct. 8, 2026 in Commercial
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Governor Gavin Newsom signed Assembly Bill 2116 into law on September 30, 2026, bringing commercial financing providers under the state's regulatory oversight. This move aims to curb unfair practices in lending, factoring, and asset-based agreements.
Why it matters
The law strengthens consumer-style protections for business-purpose transactions, which were previously less regulated. By requiring transparency on interest rates and formal licensing, the state aims to prevent deceptive practices that impact local business capital.
Under AB 2116, providers of commercial loans and accounts receivable transactions must obtain a state license by July 1, 2028. Brokers are also required to publish average and maximum annual percentage rates from the prior year on their websites.
The players
Gavin Newsom
The current Governor of California who signed the legislation into law.
Department of Financial Protection and Innovation
The state agency responsible for implementing and enforcing the new licensing requirements for financial providers.
The details
Providers must secure a license from the Department of Financial Protection and Innovation to maintain valid, enforceable agreements. If a provider remains unlicensed without a pending application, transactions entered into on or after January 1, 2028, become legally unenforceable. The law specifically governs diverse commercial products, including lease financing, open-end credit plans, and factoring, to ensure fair treatment across all business-purpose lending.
Timeline
September 30, 2026: Governor Newsom signed AB 2116 into law.
January 1, 2028: Regulatory provisions for commercial financing become effective.
July 1, 2028: Licensing deadline for all affected providers and brokers.
The Home Front
This law signals a major expansion of the California Financing Law to encompass commercial-purpose transactions. It aligns commercial financing oversight more closely with the consumer protections already established for residential lending and household credit.
Business owners should review any existing financing or factoring agreements for upcoming renewals that may cross the 2028 effective date. If you currently use commercial credit products, ask your provider about their licensing status to ensure your agreements remain legally protected.
The takeaway
The new law mandates greater transparency by requiring brokers to disclose historical interest rates on their websites. Keep records of all commercial financing agreements and check that your current financial partners are aware of the upcoming 2028 compliance deadlines.
Further reading
Learn more about local business regulatory developments in the Commercial section.
Live Poll
Should states impose stricter licensing and transparency requirements on non-loan small business financing providers?
