California's New Commercial Financing Law Rewrites the Rules for Small-Business Paper

The new framework

California Governor Gavin Newsom signed AB 2116 on September 30, 2026. The measure creates a licensing and conduct regime administered by the Department of Financial Protection and Innovation for specified providers and brokers of covered commercial financing.

The statute generally focuses on covered commercial financing of $500,000 or less offered to qualifying small businesses. The qualifying-business definition includes a gross-receipts threshold of $16 million, subject to the statute's adjustment mechanism and other requirements.

Timing

The principal licensing provisions begin January 1, 2028—not July 2028. A person who submits a complete application by the statutory deadline may be permitted to continue operating while the application is pending, subject to the law's conditions.

Conduct and enforceability

The statute addresses licensing, broker and provider conduct, and enforceability. It also restricts obtaining a confession of judgment or power of attorney before default. Coverage and consequences depend on the transaction, the parties, exemptions, implementing rules, and the final statutory text.

Who should review the law now

• Originators, purchasers, brokers, and servicers of small-business financing.

• Investors underwriting receivables, revenue-based financing, factoring, or similar products.

• Parties relying on contractual remedies that may be affected by licensing or conduct requirements.

• Compliance teams that must identify exempt entities or transactions and monitor DFPI rulemaking.

Sources

California Legislature — AB 2116 bill history and text

California Assembly committee analysis of AB 2116

Consumer Finance Monitor summary (Oct. 13, 2026)

This article is for general informational purposes only. It is not legal, tax, accounting, or investment advice, does not create an attorney-client relationship, and should not be relied on for any specific matter. Laws, court orders, deadlines, and procedural rules can change and may vary by jurisdiction. Consult qualified counsel and other professional advisers about the facts of your matter.