California SB 362, Explained: What Changes January 1, 2026

What SB 362 Actually Adds

California has required commercial financing disclosures since December 9, 2022. SB 362 does not replace that law, it adds two new layers on top of it, both taking effect January 1, 2026: an APR-equivalent disclosure requirement, and new restrictions on the use of the words "rate" and "interest" in offers of $500,000 or less. Both changes are aimed at the same underlying problem regulators have flagged across MCA marketing generally: a factor rate is not the same calculation as an interest rate, and describing one using language associated with the other can mislead a merchant about the true cost of the product.

Why "Rate" and "Interest" Are the Words Being Restricted

An MCA is priced with a factor rate, a decimal multiplier applied to the funded amount, not an interest rate calculated against an outstanding balance over time. The two numbers are not interchangeable, and a factor rate expressed as an equivalent APR is often dramatically higher than the number a factor rate alone suggests. SB 362 responds directly to that gap by requiring the APR-equivalent figure to be disclosed and by restricting when and how "rate" and "interest" can be used in the offer itself, for transactions of $500,000 or less specifically.

For a broker or funder whose marketing has historically leaned on comparisons to bank interest rates, or used the word "rate" loosely to describe a factor rate, this is the specific language SB 362 is built to catch.

Who This Applies To

The law applies to commercial financing offers of $500,000 or less, which covers the large majority of MCA deal sizes this research reviewed. It sits within California's broader "provider" framework, the same definition that has applied to brokers, not just direct funders, since the state's 2022 disclosure law took effect. If you broker MCA deals into California merchants at this deal size, SB 362 is written with your marketing and disclosure practices specifically in view.

What to Check Before January 1, 2026

1. Pull every piece of active marketing copy, from landing pages to sales scripts, that mentions "rate," "interest," or a comparison to bank financing, and flag it for review.
2. Confirm your disclosure documents will include the required APR-equivalent figure for offers at or under $500,000, starting on the effective date.
3. Ask your compliance counsel, or your MCA counsel specifically, to review current copy against the new restriction before the new year, not after a complaint.
4. If you outsource marketing or outbound conversations to a vendor, confirm they know the restriction exists and are not using restricted language on your behalf.

This Sits on Top of an Existing Disclosure Law, Not in Place of It

It is worth being precise here: SB 362 amends California's existing commercial financing disclosure regime, which has been in force since December 9, 2022. Providers already complying with that base law are not starting from zero, but they are not automatically compliant with SB 362 either. The APR-equivalent disclosure and the rate-and-interest language restriction are both new obligations layered on top of a law that was already in effect. Treat this as an update to an existing compliance program, not a brand-new one to build from scratch.

Sources

The external data in this guide draws on the sources below. Figures described in the text as estimates or industry triangulations are directional and are not attributed to a single dataset.

• Buchalter, California SB 362 rate and interest restrictions starting January 1, 2026
• Alston Consumer Finance, commercial financing disclosure requirements and exemptions

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