California requires the number everyone else avoids
California passed the first commercial financing disclosure law in the country, and since December 2022 any provider offering a California business $500,000 or less must disclose the total amount financed, the finance charge, the total repayment, the term, the payment amount and frequency, prepayment terms, and an annual percentage rate. For sales based financing the APR is estimated from the factor rate and projected sales, under a method the state sets out in detail. The effect is that a California owner sees an advance at 1.30 over six months described as what it is, an annual rate above 100 percent, in the same font as the amount.
California also licenses commercial lenders and brokers under the California Financing Law. Most non-bank lenders offering term loans and lines of credit to California businesses hold a license from the Department of Financial Protection and Innovation; it is a reasonable thing to ask any lender, and any broker, before you sign.
The California market
The largest small business population in the country and the widest spread of trades: agriculture in the Central Valley, trucking through the ports of Los Angeles, Long Beach and Oakland, construction everywhere, restaurants and hospitality on the coast, technology services, medical and dental practices, and the manufacturing that survives in the Inland Empire. Every national lender is active here. The competition is good for borrowers with clean files and brutal for those with stacked positions.
Costs run higher in California: rent, labor, insurance, compliance. Lenders know it and size approvals against revenue rather than against the thinner margins. A California business with $1,000,000 in annual deposits is approved for the same amounts as one in Ohio; it simply needs to be more careful about what the payment does to a thinner bottom line.
Which structures fit which California trades
Port trucking: factoring, with equipment financing for the clean trucks the state now requires at the ports. Agriculture: seasonal lines of credit sized to the growing season, equipment financing for harvesters and irrigation, and the SBA and USDA programs for land and long term investment. Construction: a line sized to the largest job and equipment loans for the iron. Restaurants and hospitality: equipment financing for the build out, a seasonal line, and SBA for expansion. Medical and dental: equipment loans with specialist lenders, and practice acquisition loans through SBA 7(a).
What California lenders look at
Statements, as everywhere, and the licensing picture: a lender will ask for state and local business licenses, contractor licenses where they apply, and for agriculture, the crop and the buyer. Lenders also look at the lease; a San Francisco or Los Angeles rent that is more than 10 percent of deposits is a flag. And they look closely at existing positions, because the disclosure law has made stacking easier to see and California lenders decline stacked files quickly.
The plain recommendation for a California business
Read the APR on every offer; the law put it there for you. Ask any lender or broker for its California license. If your returns support it, go to a licensed non-bank lender, a community bank or an SBA preferred lender before an advance funder. Keep the equipment on equipment financing and the season on a line. Bring any offer to us before signing; we read it, print the whole number, and tell you whether to take it.