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Committee clears measure to tighten APR disclosure and reporting for small‑business financing
Summary
Senators advanced SB 362 to strengthen California’s small business financing disclosure regime, directing the Department of Financial Protection and Innovation to compare estimated versus actual APRs and to have clear enforcement authority. Supporters said clearer APRs help small businesses compare offers; one industry group raised concerns about
Senator Grayson presented SB 362 to the Senate Committee on Banking and Financial Institutions, saying the bill would strengthen California’s small business financing disclosure framework so entrepreneurs can compare offers and avoid opaque, high‑cost products. "These requirements give small businesses the information they need to compare financing offers" Grayson said.
Heidi Pickman of Cameo Network, a sponsor, told the committee the bill would allow the Department of Financial Protection and Innovation (DFPI) to compare providers’ estimated APRs with actual APRs and to prevent manipulation of estimates. She described a case in which a small business accepted a merchant cash advance and faced unaffordable monthly payments that nearly sank the business before refinancing to more sustainable debt.
Supporters, including Small Business Majority and the Consumer Federation of California, said the federal Truth in Lending Act does not cover most small business financing and that state disclosure rules enacted in 2018 set a baseline that now requires tightening and enforcement. Bianca Blomquist of Small Business Majority told the panel that accurate APR disclosure is crucial for owners who often lack financial officers and rely on clear pricing to choose financing.
Opponents from newer product sectors raised narrow concerns. A representative of the Revenue Based Financing Coalition said the bill’s section limiting use of the term "interest" throughout a revenue‑based financing arrangement could be impractical because such products have variable effective rates tied to revenue share and would require recalculation each payment.
Committee members asked technical questions about revenue‑based products and APR calculation. Senator Grayson said the measure builds on California’s earlier work (SB 1235 and subsequent rulemaking) and on experience in other states. The committee moved the bill and, after a full roll call later in the hearing, recorded seven ayes and zero nos; the chair announced the bill "is out of committee."
