What a California-compliant commercial financing disclosure actually looks like, line by line — and how to use it to compare offers.
California's SB 1235 (the CFDL) requires every commercial financing offer in California to disclose APR-equivalent rates, total dollar cost, payment schedule, and prepayment treatment in a standardized format. Enforced by the California Department of Financial Protection and Innovation. Applies to MCAs, term loans, lines of credit, and factoring — the rule that finally puts factor-rate pricing in apples-to-apples comparison terms.
California's commercial financing disclosure law is the one most other state laws are modeled on, and it's the one borrowers in the state are most likely to actually receive a form under. But "you'll get a disclosure" is the start of the conversation, not the end. The point of the disclosure is to let you compare two offers using the same numbers. To do that, you have to know what the lines mean.
This is a line-by-line walk-through of what a California-compliant disclosure looks like in early 2026, what each line is doing, and what to ask if a line is missing or makes no sense.
California's Senate Bill 1235 was signed in 2018, but the implementing regulations from the Department of Financial Protection and Innovation (DFPI) didn't take effect until December 9, 2022. Since then, providers offering commercial financing of $500,000 or less to California-located borrowers have been required to deliver a standardized disclosure before the borrower signs. (A follow-on California law, SB 362, took effect January 1, 2026 and tightens how providers can use the words "rate" and "interest" in offers — useful context, but the disclosure framework below is the older SB 1235 / CFDL regime that's been operating for three years.)
"Commercial financing" is defined broadly. It covers:
The disclosure framework is product-aware — the form for an MCA looks different from the form for a term loan because the underlying numbers are different. But the goal across products is the same: surface the dollar cost, the APR, and the payment structure on one page.
For the broader state-by-state map, see our state commercial financing disclosure laws overview.
Here is what you should expect to see on a covered California disclosure, with what each line means in practice.
The face amount of the deal — the principal of a term loan, the purchase amount of an MCA, the credit line limit. This is not the amount that hits your bank account. That comes next.
The actual wire to your business — total financing minus any fees that come off the top (origination fees, underwriting fees, broker fees in some structures, ACH setup fees). The gap between the total financing and the disbursement amount is your first signal. A "$100,000 advance" that disburses $94,000 means $6,000 in fees came out the front before you saw a dollar.
The total dollar cost of the capital. For an MCA, this is the difference between the purchase amount and the total payback (or, equivalently, principal multiplied by factor rate, minus principal). For a term loan, it's all of the interest plus any fees rolled into the cost of credit. This is the number you compare across offers. Two offers with the same disbursement amount and different finance charges are directly comparable.
Disbursement amount plus finance charge plus any fees not already in the finance charge — every dollar that will leave your account over the life of the contract. For an MCA, this is the total holdback amount across all daily debits. For a term loan, it's principal plus all interest plus all fees.
This is the line California spent the most regulatory effort on, and it's the most useful one for borrowers. For an MCA, where there's no contractual term length (the holdback is a percentage of receivables, not a fixed monthly payment), California requires providers to calculate an estimated APR using a defined methodology — typically based on the historical sales data underwritten in the deal and the projected holdback duration.
The result is an APR-equivalent that lets a small business owner compare an MCA priced at "1.35 factor" to a term loan priced at "29% APR" without doing the math themselves. The APR will sometimes look surprising — short-term MCAs often translate to APR equivalents in the 50% – 100%+ range, which is the math working as designed, not the disclosure being wrong. See our APR vs factor rate explainer and factor rate vs APR answer for the conversion logic.
The actual payment schedule. For an MCA, this is the daily or weekly debit amount, the holdback percentage if applicable, and the estimated total business-day count. For a term loan, the monthly payment, the number of months, and the rate type (fixed or variable). Pay attention to frequency — a "low monthly payment" reframed as a daily debit hits the cash flow very differently.
The single most-overlooked line on the form, and one of the most important. The disclosure must say what happens if you pay off the contract early:
The reason this line matters: borrowers refinance MCAs all the time, and the math on whether the refinance pencils depends on whether early payoff reduces cost. See our refinancing MCA into a term loan walkthrough for what this looks like in practice.
California's DFPI rule prescribes a methodology rather than letting providers pick their own. The provider must use:
1. The disbursement amount as the principal. 2. The total payback amount as the future value. 3. An estimated repayment period derived from the underwritten sales data — typically the historical average daily/monthly volume divided by the holdback to project a business-day count to full repayment.
That projected term feeds the APR calculation. Because the term is estimated, two providers underwriting the same business can disclose slightly different estimated APRs even on identical-priced offers, depending on how they're projecting future sales. The disclosure rule requires the provider to document the methodology — it's auditable.
What this means for borrowers: if two MCA offers have similar finance charges and similar terms but very different estimated APRs, ask which sales-projection assumption each provider used. The cheaper-looking one may simply be assuming a longer (slower) repayment.
California's CFDL also reaches brokers in some structures. Where a broker is involved in the transaction, additional disclosure may be required around the broker's compensation. The cleanest firms in the space will tell you on request even where the law doesn't compel it. ClearValue Lending is a funding platform. If a broker or platform won't disclose how they're paid, that's a flag — see our predatory lender warning signs for the broader pattern.
If you're a California-located borrower applying for commercial financing of $500,000 or less, you should receive a disclosure form before you sign. If you don't:
1. Ask for it by name. "I'd like the SB 1235 / CFDL disclosure form for this offer in writing before I sign." Any compliant provider can produce it. 2. If they refuse or stall, that's a meaningful signal about the operation. Slow down. 3. If you've already signed without one, you can file a complaint with California DFPI. The DFPI has issued guidance and brought enforcement actions; the compliance posture has teeth.
The disclosure is the borrower's tool, not a courtesy from the provider. Treat it like one.
New York's S5470B covers transactions up to $2.5 million (versus California's $500,000) and has more specific obligations around broker disclosure. We'll publish a parallel walk-through of New York's disclosure form in a few weeks. The substance overlaps heavily — finance charge, total payback, APR-equivalent, prepayment treatment — but the thresholds, broker rules, and enforcement bodies differ. If you operate in both states, you'll see disclosures from both regimes; the line items map closely but the form layouts don't match.
A California disclosure is a tool for comparing two offers using the same numbers. The disbursement amount tells you what hits your account; the finance charge tells you what it costs in dollars; the estimated APR normalizes the comparison; the prepayment line tells you whether early payoff helps. Read all four before you sign.
If you're shopping financing now and want a real conversation about what your file qualifies for — disclosed cleanly, in writing — start an application or run the numbers in our funding calculator first. Either way, demand the disclosure. The framework only works when borrowers actually use it.
If you're going deeper on this topic, these are the next stops:
APR-equivalent rate (calculated per CFDL formula), total dollar cost of capital, payment amount and schedule, prepayment policy (discount, no change, or penalty), and any fees. All in a standardized format before the borrower signs.
Yes. MCAs are explicitly covered. The legal structure (purchase of future receivables vs. loan) doesn't exempt them from disclosure requirements under the CFDL. The same APR-equivalent calculation methodology applies.
The California Department of Financial Protection and Innovation (DFPI). Violations can result in fines and consumer-protection enforcement actions. Borrowers can also report non-compliant offers directly to the DFPI.
Yes — New York (S5470-B, AB 10118), Virginia, Utah, and Georgia have active commercial financing disclosure laws. More states are expected to pass similar rules in 2026-2027. The trend is one-way: toward transparency.