Merchant Cash Advance in California: 2026 Guide to SB 1235, SB 666, SB 362, and Real Costs

Quick Answer: California has three commercial financing disclosure laws that apply to MCAs. SB 1235 (DFPI regulations effective December 9, 2022) requires every MCA provider to disclose the total dollar cost and a standardized APR before you sign — the first such requirement in the U.S. SB 666 (effective January 1, 2024) bans junk fees: no ACH-processing fees on required payments, no payoff-statement fees, no vague add-on charges. SB 362 (effective January 1, 2026) closes the “rate” loophole: providers must now express pricing as an APR every time they state a charge, rate, or financing amount during the sales process — not just at signing — and must re-disclose the APR when offer terms change. California does not cap MCA rates. APRs of 60–200%+ are legal so long as they’re disclosed. Request the written SB 1235 disclosure form before signing anything, and use the MCA calculator to verify the numbers yourself.

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California’s MCA Disclosure Laws: Three Layers of Protection

California has enacted three laws governing merchant cash advances and other commercial financing — SB 1235, SB 666, and SB 362. Together they form the most detailed state-level protection framework for MCAs in the country.

1. SB 1235: California’s Commercial Financing Disclosure Law (DFPI Regulations Effective December 9, 2022)

California Senate Bill 1235 was signed in September 2018. The California Department of Financial Protection and Innovation (DFPI) finalized implementing regulations, which became enforceable on December 9, 2022. California was the first state in the U.S. to mandate consumer-style APR disclosure for commercial financing, including merchant cash advances.

Coverage: SB 1235 applies to any provider extending commercial financing of $500,000 or less to a business principally directed or managed from California — regardless of where the provider is located. A South Dakota-based MCA company that funds a Sacramento restaurant is subject to California’s disclosure law.

What providers must disclose before you sign:

Required Disclosure	What It Means in Practice
Total funds provided	The advance amount in dollars
Total dollar cost of financing	Every fee, in plain dollars — not just the factor multiplied out
Estimated term	How long repayment will take at your current revenue pace
Payment method, frequency, and amounts	Daily/weekly/monthly; ACH or holdback; estimated dollar amounts
Prepayment terms	Whether early payoff saves you money or triggers a penalty
Annual percentage rate (APR)	Annualized cost using a DFPI-approved methodology

The disclosure must be delivered in writing before you sign. A sales rep reading you numbers over the phone does not satisfy this requirement. If you don’t receive a written SB 1235 disclosure form before signing, the provider is violating California law.

A note on APR calculation: The DFPI’s methodology for calculating APR on MCAs differs from the federal TILA standard used for consumer loans. Because MCAs have variable repayment tied to daily revenue, the DFPI method requires providers to estimate a repayment term based on projected holdback amounts and then annualize from there. The disclosed APR is an approximation — it will be accurate if your revenue matches projections, and the actual cost will be higher if you repay faster (since the fee is fixed regardless of speed) or lower in effective APR terms if repayment stretches longer. It is still the most useful comparison figure available, and California law requires you to receive it.

2. SB 666: Fee Prohibitions (Effective January 1, 2024)

California SB 666 was signed in October 2023 and took effect January 1, 2024. It bans several fees that commercial-financing providers used to add on top of the cost disclosed under SB 1235.

Banned fees under SB 666:

• ACH-processing fees on required payments. Providers may not charge a fee simply to accept your scheduled ACH debit. A fee for a returned or bounced payment (NSF) is still permitted — only the fee for a successfully processed required payment is prohibited.
• Payoff-statement fees. You are entitled to a document stating your current balance and the amount needed to pay off the advance early at no charge. Providers who previously charged $25–$75 for this routine document may no longer do so.
• Vague add-on charges. Fees labeled “risk assessment,” “due diligence,” “platform fee,” or similar — with no clear corresponding service beyond what an origination fee already covers — are prohibited.

Who is protected: SB 666 covers California small businesses: businesses headquartered in California, with California-domiciled officers, 100 or fewer employees, and $15 million or less in average annual gross receipts over the prior three years. Essentially all independent California businesses qualify.

Enforcement: The DFPI can investigate, issue orders, and levy civil penalties. If a provider charges an SB 666-prohibited fee, report it at dfpi.ca.gov.

3. SB 362: Continuous APR Disclosure During the Sales Process (Effective January 1, 2026)

California strengthened its disclosure framework again with SB 362 (Chapter 352, Statutes of 2025), effective January 1, 2026. It directly addresses a practice that SB 1235 left open: a sales rep quoting a “factor rate,” a “rate,” or a “weekly payment” that sounds low without ever mentioning the APR until the final form arrives.

What SB 362 requires for commercial financing of $500,000 or less:

• Express pricing as an APR every time a provider states a charge, rate, or financing amount to a prospective recipient — not just on the final written disclosure form. This applies to phone calls, emails, term sheets, and any marketing that quotes a specific amount.
• Stop using the words “rate” or “interest” in any way that could mislead you about the true annualized cost of the financing.
• Re-disclose the estimated APR whenever offer terms change during negotiation — so a revised factor rate or adjusted holdback must come with an updated APR, not just a new “rate.”

Violations are treated as unfair, deceptive, or abusive acts under the California Consumer Financial Protection Law — the same enforcement standard that applies to the rest of the DFPI’s commercial financing oversight.

Practical takeaway for 2026: Any California MCA offer of $500,000 or less should show you an APR on the first quote and every subsequent revised quote. If a broker is still selling on a “factor” or a vague “rate” without an APR beside it, that sales practice is now a red flag under California law — and potentially a reportable violation.

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DFPI Enforcement Actions Against MCA Providers

California’s disclosure laws are actively enforced, and the DFPI has signaled that MCAs are squarely within its sights.

Expansion Capital Group, LLC (April 2022)

The DFPI issued a consent order against Expansion Capital Group, LLC, a South Dakota-based merchant cash advance provider, on April 4, 2022. The significance is jurisdictional: it established that an out-of-state MCA company funding California businesses is subject to DFPI oversight, not only California-licensed lenders. If you’re a California business owner, the location of your provider’s headquarters does not exempt them from California’s rules.

The DFPI’s Standing MCA Advisory

Beyond formal orders, the DFPI publishes a public advisory, “Speak Up About Merchant Cash Advances,” that directly invites California small businesses to report MCA providers. The advisory flags specific abuses to watch for: misrepresenting the cost of an advance, continuing to debit a business account after the agreed amount is repaid, and refusing to reconcile payments when revenue drops. Complaints can be filed at dfpi.ca.gov.

A Note on the Apoyo Financiero Penalty

You may see references to a $1 million DFPI penalty against Apoyo Financiero Inc. in November 2025. That action is real, but it is not an MCA case — it concerned a consumer installment lender charging interest above California’s 36% rate cap under the Fair Access to Credit Act, a separate law from the commercial-financing rules that govern MCAs. It’s worth knowing because it shows the DFPI imposes seven-figure penalties when it finds overcharging, but it is not precedent specific to merchant cash advances.

What enforcement tells you: The DFPI monitors commercial financing providers and uses its authority under SB 1235 and related statutes. A provider cutting corners on disclosures faces real regulatory risk — and that same posture often reflects how they treat borrowers throughout the repayment period.

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California’s Small Business Market

California has 4.3 million small businesses — 99.8% of all businesses in the state — employing approximately 7.6 million Californians. This is by far the largest MCA market in the U.S. Industries with high MCA demand in California:

Food service and hospitality: California has more than 80,000 restaurants and cafes. Seasonal swings, high ingredient costs, thin margins, and the state’s elevated labor costs (minimum wage $16–$20/hr depending on sector as of 2026) create persistent working capital gaps. MCA holdbacks on daily card volume work naturally for food service operators. Typical advance range: $25,000–$150,000.

Retail: Over 305,000 small retail businesses in California rely on pre-holiday inventory builds, store renovations, and bridging slow post-holiday periods. Boutique shops, specialty retailers, and franchise operators are frequent MCA borrowers. Typical advance range: $15,000–$100,000.

Construction and trades: California’s construction market — especially in Los Angeles, the Bay Area, and San Diego — involves large up-front material and subcontractor costs before owner payments arrive. General contractors and specialty trades use MCAs to bridge that gap. Typical advance range: $50,000–$250,000.

Medical and dental practices: Insurance reimbursement delays of 30–90 days create persistent cash flow gaps for independent California practices. MCAs fill the gap without requiring real estate collateral. Typical advance range: $50,000–$200,000.

Personal services: California’s salon, spa, and fitness market is dense and card-dependent — high daily card volume combined with seasonal hiring needs makes these strong MCA candidates. Typical advance range: $10,000–$75,000.

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What an MCA Costs a California Business: Real Numbers

Under SB 1235, your provider is legally required to disclose the total dollar cost and APR before you sign. Here is what those numbers look like at common advance sizes:

Advance Amount	Factor Rate	Total Repayment	Your Fee	Est. APR (6-month term)
$25,000	1.20	$30,000	$5,000	~40%
$25,000	1.35	$33,750	$8,750	~70%
$50,000	1.25	$62,500	$12,500	~50%
$50,000	1.40	$70,000	$20,000	~80%
$75,000	1.30	$97,500	$22,500	~60%
$100,000	1.30	$130,000	$30,000	~60%
$100,000	1.45	$145,000	$45,000	~90%

APR estimates assume a 6-month repayment term. Actual APR depends on your daily revenue and holdback percentage — your SB 1235 disclosure form will show the provider’s calculated figure using the DFPI-approved methodology.

Factor rates for California businesses typically range from 1.15 to 1.50 depending on credit score, time in business, revenue consistency, and industry. Well-established California businesses (3+ years, $25K+/month in revenue, 620+ personal credit score) typically see offers starting at 1.15–1.25. Newer businesses or those with credit challenges should expect 1.35–1.50.

Use the MCA calculator to model your specific advance amount and factor rate before comparing offers.

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MCA Providers That Fund California Businesses

All 24 providers in our directory fund California businesses. These are the ones with notable California presence or characteristics particularly relevant to CA borrowers:

Provider	CA Connection	Min Credit Score	Min Monthly Revenue	Factor Rate Range	Best For
National Funding	HQ: San Diego, CA	None specified	~$20,800/mo ($250K/yr)	1.10–1.20	CA-rooted, SB 1235 compliant by design
Kapitus	Funds CA nationally	625+	~$20,800/mo	1.10–1.50	Large advances, established CA businesses
Credibly	Funds CA nationally	500	$15,000/mo	1.11–1.40	Competitive rates, credit-challenged borrowers
Fora Financial	Funds CA nationally	500	$12,000/mo	1.15–1.48	Bad credit, fast funding
OnDeck	Funds CA nationally	625	~$10,000/mo	1.11–1.18	Established CA businesses, lower factor rates
Libertas Funding	Funds CA nationally	600	$75,000/mo	1.10–1.35	High-revenue CA businesses
Forward Financing	Funds CA nationally	500	$10,000/mo	~1.20–1.45	Smaller advances, newer businesses
Lendio	CA marketplace access	550+	$10,000/mo	varies by lender	Comparing multiple CA-compliant offers at once

On National Funding: Headquartered in San Diego, National Funding is the only major MCA provider with California roots. Their agreements are built to comply with SB 1235. They offer advances from $5,000 to $500,000 with factor rates starting at 1.10. Minimum: 6 months in business, $250,000 in annual revenue, no minimum credit score published.

On using a marketplace: Lendio connects California borrowers to multiple lenders through one application — useful if you want to compare SB 1235-compliant offers side by side without applying to each provider separately.

On Expansion Capital Group: ECG received a DFPI consent order in April 2022. Before engaging them, verify their current compliance status at dfpi.ca.gov.

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Five Things to Check Before Signing an MCA in California

California law gives you more pre-signing transparency than almost any other state. Use it.

1. Request the SB 1235 written disclosure form. Before signing, you are legally entitled to a written document listing total cost, APR, holdback percentage, estimated term, and prepayment terms. If a provider skips this step, they are violating California law. Report violations to the DFPI at dfpi.ca.gov.

2. Verify the disclosed APR against the factor rate. Factor rate and APR are different numbers. A 1.30 factor rate on a $50,000 advance looks modest, but at a 6-month pace that’s roughly 60% APR. Your SB 1235 disclosure will show the DFPI-calculated APR. If it exceeds 100%, compare other financing options before signing.

3. Confirm there’s a genuine reconciliation provision. A legitimate MCA should allow you to request a holdback reduction if monthly revenue drops significantly — typically a 20–30% decline triggers eligibility. This is what distinguishes a true revenue-based advance from a fixed-payment loan. If the contract has no reconciliation clause, or the provider won’t commit to one when you ask, that’s a significant warning sign.

4. Model your daily cash flow impact before agreeing. If daily card and bank deposits average $3,000 and holdback is 15%, you’re committing $450/day to repayment. Can you cover rent, payroll, supplies, and operating costs on the remaining $2,550? Do this math before you sign — not after.

5. Get at least two offers. A 0.10 difference in factor rate on a $75,000 advance is $7,500. On a $150,000 advance, that’s $15,000. Browse the provider directory and apply to at least two lenders. Under SB 1235, every compliant California provider gives you an APR to compare directly.

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When an MCA Makes Sense for a California Business

An MCA is worth considering when:

• You need capital in 24–72 hours and cannot wait for bank (30–60 days) or SBA (30–90 days) approval
• You’ve been declined for a traditional loan or your credit profile makes bank financing inaccessible
• The use of funds generates returns that exceed the MCA fee — a restaurant buying equipment that adds $8,000/month in revenue at a $5,000 MCA cost is net positive
• Your daily card or bank deposit volume is consistent enough that the holdback won’t stall daily operations

An MCA is likely the wrong choice when:

• You’re covering ongoing operating losses — MCAs accelerate cash flow problems rather than solve them
• You already have an open MCA — stacking two holdbacks often pushes total daily deductions above 25–35% of revenue, which can be operationally crippling for most businesses
• A cheaper alternative is reachable — California businesses with 6+ months in operation and $10K+/month in revenue often qualify for a business line of credit at significantly lower APR; see MCA vs. line of credit, MCA vs. SBA loans, and MCA alternatives

For a full cost-benefit framework: Is a Merchant Cash Advance Worth It?

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California City Guides

MCA pricing is set statewide, but local industry mix and revenue patterns change which businesses are a good fit. City-specific guides:

• Merchant Cash Advance in Los Angeles — entertainment, logistics, and the Port/garment-district economy
• Merchant Cash Advance in San Francisco — tech-adjacent services, hospitality, and biotech in California’s most expensive market
• Merchant Cash Advance in San Diego — defense, tourism, biotech, and craft brewing, with where invoice factoring beats an MCA
• Merchant Cash Advance in San Jose — Silicon Valley tech-adjacent services, healthcare, restaurants, and construction under California’s strongest-in-the-country disclosure framework
• Merchant Cash Advance in Sacramento — state government vendors, agricultural distribution hub, and healthcare orbit around UC Davis Medical Center
• Merchant Cash Advance in Fresno — Central Valley agriculture, Community Regional Medical Center (the only Level I trauma center between Sacramento and LA), and Fresno State seasonality
• Merchant Cash Advance in Stockton — San Joaquin County seat; post-bankruptcy credit environment, agricultural supply chain seasonal trap, Port of Stockton logistics payment float, and high Medi-Cal reimbursement lag for healthcare practices
• Merchant Cash Advance in Bakersfield — Kern County oil-cycle risk, agricultural harvest seasonality (table grapes, citrus, almonds), and the healthcare orbit around Kern Medical Center
• Merchant Cash Advance in Long Beach — Port of Long Beach supply chain, SpaceX and aerospace orbit, CSULB academic-calendar seasonality
• Merchant Cash Advance in Anaheim — Disneyland tourism seasonality trap, Convention Center event-revenue spikes, Honda Center and Angel Stadium orbit
• Merchant Cash Advance in Irvine — Edwards Lifesciences and life sciences corporate orbit, UCI academic-calendar seasonality, biotech startup grant-timing trap
• Merchant Cash Advance in Santa Ana — Orange County seat; Latino small-business predatory-targeting risk, Fashion District wholesale payment trap, CalOptima Medi-Cal reimbursement lag
• Merchant Cash Advance in Riverside — Inland Empire distribution and logistics, UC Riverside orbit
• Merchant Cash Advance in Ontario, CA — Ontario International Airport cargo hub, Inland Empire East warehousing corridor (Prologis, Amazon), Ontario Mills seasonality
• Merchant Cash Advance in Moreno Valley, CA — World Logistics Center (40.6M sqft, Skechers, Amazon, Ross, P&G), March Air Reserve Base contractor orbit, and RUHS Medi-Cal reimbursement lag
• Merchant Cash Advance in Chula Vista, CA — Otay Mesa Port of Entry cross-border trade (second-busiest U.S.-Mexico commercial crossing), Collins Aerospace manufacturing invoice trap, and Gaylord Pacific Resort convention seasonality

For California businesses with significant Las Vegas cross-market exposure — vendors supplying the Strip, tourism-linked distribution, or Nevada-incorporated entities — see Merchant Cash Advance in Nevada for Nevada’s no-disclosure, explicit-COJ framework, and Merchant Cash Advance in Las Vegas for the Strip’s hospitality-driven MCA demand pattern.

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Sources: California SB 1235 — California DFPI, Commercial Financing Disclosure Regulations effective December 9, 2022 (dfpi.ca.gov). California SB 666 — signed October 13, 2023, effective January 1, 2024; California Legislative Information (leginfo.legislature.ca.gov). Expansion Capital Group consent order — DFPI, April 4, 2022 (dfpi.ca.gov). DFPI small-business MCA advisory, “Speak Up About Merchant Cash Advances” (dfpi.ca.gov). Apoyo Financiero penalty (a consumer-lending rate-cap action, not an MCA case) — DFPI, November 2025. California small business statistics — U.S. Small Business Administration Office of Advocacy, California Small Business Profile. To verify a provider’s California license status or file a complaint: dfpi.ca.gov.

This guide is general information, not legal advice. Consult a California attorney before signing any commercial financing agreement.