California has enacted a significant expansion of its commercial financing regulations, broadening state oversight of financing products offered to small businesses. Governor Gavin Newsom signed AB 2116 on September 30, adding new requirements to the California Financing Law and expanding the regulatory role of the Department of Financial Protection and Innovation.

The legislation, which becomes operative primarily in 2028, brings a broader range of commercial financing products under the state’s regulatory framework. Covered transactions include commercial loans, accounts-receivable purchase transactions such as factoring, asset-based lending, commercial open-end credit plans and lease financing. Beginning July 1, 2028, covered commercial financing providers and brokers generally will need to obtain state licenses, subject to specified exemptions.

For commercial finance companies, brokers and businesses seeking financing, the changes will mean a more comprehensive regulatory environment and additional compliance obligations. Companies operating in California will have time to prepare before the major licensing provisions take effect, but the legislation represents a substantial shift toward greater state oversight of the commercial financing marketplace.

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