Los Angeles-area entrepreneurs who’ve ever taken out a merchant cash advance or online business loan just got a long-awaited win in Sacramento. Gov. Gavin Newsom has signed Assembly Bill 2116, the Protect Small Businesses from Predatory Lending Act, extending California’s financing law to cover commercial financing products that have operated with little state oversight for years.
The bill’s author, Assemblywoman Pilar Schiavo, and Assembly Speaker Robert Rivas visited Santa Clarita this week to walk local small business owners through what the new law means for them. The timing matters: a federal Consumer Financial Protection Bureau analysis cited during the rollout found merchant cash advances average a 94% annual interest rate nationally, and at least one Los Angeles-area childcare provider reportedly faced a rate as high as 358%.
AB 2116 brings commercial financing providers and brokers, including merchant cash advance companies, under an expanded state oversight framework similar to how traditional lenders are already regulated. It also bars these companies from obtaining a confession of judgment or power of attorney before a borrower has even defaulted, a practice critics say has trapped business owners in one-sided contracts with little recourse.
“This bill does not restrict capital, but it brings these unregulated businesses into the light,” Schiavo said. Rivas added that business owners “shouldn’t need an army of attorneys, an army of consultants and lobbyists just to open a business.”
The Santa Clarita Valley Chamber of Commerce backed the bill after weighing concerns raised by the financing industry. “Access to capital and accountability go hand in hand,” said John Musella, the Chamber’s chief advocacy officer, who also pushed for clear implementation guidance before licensing requirements take effect.
For LA-area business owners, the practical impact isn’t immediate: the expanded oversight framework kicks in January 1, 2028, with licensing requirements for financing providers and brokers following on July 1, 2028. Still, it’s worth knowing about now, especially if you’re currently shopping for working capital or expansion financing. Before signing any cash-advance agreement, read the full repayment terms, ask directly about the effective annual interest rate rather than just the “factor rate,” and never sign anything resembling a confession of judgment or power of attorney up front.
Source: KHTS Radio
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