Small Business Loans in California: Decode the DFPI Disclosure
California gives business owners a useful tool: a required disclosure for many commercial financing offers of $500,000 or less. If you are comparing small business loans in California, this guide decodes each number on that disclosure, shows how to set two different products side by side, and explains how to check UCC filings with the California Secretary of State.
By States Funding Team · Published
The short version
- DFPI announced its commercial financing disclosure regulations would take effect December 9, 2022.
- They cover offers of $500,000 or less from providers including installment lenders, open-end credit, factoring and merchant cash advances.
- The disclosure includes an APR, and an average monthly cost for products without a monthly payment.
- Ask whether the offer is covered, and request the disclosure when the rules require it.
What the California rules cover
According to the California Department of Financial Protection and Innovation (DFPI), the commercial financing disclosure regulations apply to providers including traditional installment loans and open-end credit, commercial factoring and merchant cash advances. The rules cover offers of $500,000 or less. If your request is larger, the regulation may not apply, but you can still ask for the same figures.
The DFPI material treats some product types, such as factoring, in their own way, so do not try to work out coverage for a particular deal from a summary. Ask the provider directly: “Is this offer covered by California’s commercial financing disclosure rules, and will you give me the disclosure?” If you need a firm answer for a specific deal, ask an attorney.
Decoding the disclosure, line by line
DFPI lists metrics such as the amount of funding the small business will receive, the APR, a payment amount if applicable, the term, prepayment policies and, for products without a monthly payment, an average monthly cost. Here is what each one is useful for, and the follow-up question to ask:
Amount of funding you will receive
Use it for: Your starting point. Compare it with the amount you asked for and the amount on any term sheet.
Ask: Is anything deducted before the money reaches my account?
Annual percentage rate (APR)
Use it for: A rate figure to line up across every offer you receive, whatever the product type.
Ask: What assumptions went into this APR, such as how long repayment is expected to take?
Payment amount (if applicable)
Use it for: Tells you what leaves your account each time. Test it against your slowest recent month.
Ask: How often is it collected, and can it change?
Term
Use it for: How long you are committed. Write it next to the payment for each offer so you see both together.
Ask: Is the term fixed, or an estimate that depends on my sales?
Prepayment policies
Use it for: Shows whether paying early saves you anything or costs you anything.
Ask: If I pay off at a specific date, what exactly would I owe?
Average monthly cost (products without a monthly payment)
Use it for: Gives a monthly figure for products that do not have a monthly payment, so you have something to set next to a monthly loan payment.
Ask: What goes into this figure, and is it comparable to the monthly payment on my other offer?
Comparing a loan with a product that has no monthly payment
The hardest comparison is between two different kinds of financing, for example a term loan with a monthly payment and a product without one. Under the DFPI list of metrics, a covered offer discloses an APR, and a product without a monthly payment also shows an average monthly cost. The two offers below are illustrative only. They are made up for this guide and are not quotes from any lender.
The rows are standalone illustrative disclosure fields, not a single calculated offer. Do not infer a payment, term or APR from another row. In a real disclosure, use the provider’s stated figures and ask how each metric was calculated before comparing offers.
| Illustrative disclosure line | Offer X (term loan) | Offer Y (no monthly payment) |
|---|---|---|
| Funding you will receive | $80,000 | $75,000 |
| APR | 24% | 41% |
| Payment amount | $3,140 monthly | Not applicable |
| Average monthly cost | Not applicable | $2,563 |
| Term | 36 months | Estimated 12 months |
| Prepayment | No penalty stated | No discount stated |
How an owner might read this illustration:
- Start with the APR. In this example Offer Y carries a much higher APR. That alone is a reason to ask what Offer Y gives you that Offer X does not.
- Then look at the monthly figures. They look close, but one is a payment and the other is an average monthly cost, so ask each provider to explain what its figure includes before treating them as equal.
- Then the term. Offer X commits you for three years. Offer Y is shorter, but its term is an estimate here. Ask what changes it.
- Finally, your purpose. If you need the money for a short gap, a shorter commitment may matter to you. If you are paying for something that earns over years, a longer term may fit better. Only you can weigh that, so write down the purpose first.
This kind of reading matters. In the Federal Reserve Banks’ 2025 Small Business Credit Survey, 60% of employer firms that borrowed from online lenders reported that actual borrowing costs were higher than expected. The same survey found the share of applicants seeking financing at online fintech lenders rose from 17% in the 2020 survey to 29% in the 2025 survey.
Check UCC filings with the California Secretary of State
Cost is one side of an offer. The other is what you pledge. The California Secretary of State says filing a UCC financing statement with its office serves to perfect a security interest in the named collateral and establish priority in case of debtor default or bankruptcy. It offers online UCC searches and filings through UCC Connect.
Two practical steps for a California owner:
- Before you apply, search your business name on the Secretary of State’s UCC Connect so you know what is already on file.
- Before you sign, ask the lender whether it will file a UCC financing statement and what collateral the filing will name. If the answer is broader than you expected, ask why.
Our UCC filing guide has more questions to ask. If the offer is a cash advance, the business cash advance guide shows how to turn it into dollars, and the Florida guide covers a different state’s disclosure if you operate there too.
A California owner’s checklist
- Write down the purpose of the money and how long you expect to need it.
- Ask every provider whether your offer is covered by the DFPI disclosure rules, and request the disclosure.
- Put the six metrics for every offer into one table.
- Compare APRs first, then payments or average monthly cost, then term and prepayment.
- Search UCC Connect for your business name and ask each lender what its filing would name.
- Read the full agreement before signing, and get an attorney or accountant to review anything unclear.
Where States Funding fits for California businesses
States Funding is not a lender. It operates a platform that matches U.S. small and medium businesses, including California businesses, with funding offers from independent third-party lenders. Those lenders originate and service the financing and decide approval, rates and terms. States Funding does not issue the DFPI disclosure; ask the lender behind any offer for it.
One form lets you compare offers across the lender network, with every rate, term and fee shown up front. Any offer you qualify for appears side by side with full term details, total payback and effective APR, and a real advisor can explain the trade-offs between offers. It costs $0 to apply, with no obligation to accept an offer; lender fees on an offer you accept are separate. The typical floors to apply are about 6 months in business and $10K or more in monthly revenue. They are floors, not approval criteria, and States Funding does not guarantee an offer or that funding will close by any date. Offers are non-binding until you e-sign a funding agreement directly with the lender, and the actual lender written terms govern. See how States Funding works, or apply here when you are ready.
Sources
- California Department of Financial Protection and Innovation press release, June 14, 2022
- California commercial financing disclosure regulation, final text (10 CCR 921)
- California Secretary of State, Uniform Commercial Code
- Federal Reserve Banks, 2026 Report on Employer Firms (2025 Small Business Credit Survey)
This guide is general information for U.S. business owners, not financial, legal or tax advice. States Funding is not a lender. Loans, advances and other financing products are originated and serviced by independent partner lenders, and States Funding does not guarantee that any application will result in an offer. Any examples are illustrative. The actual lender written terms govern any offer you receive.