California Unanimously Passes Bill to Protect Small Businesses from Subprime Mortgage-Style Abuses
For immediate release: Aug. 26, 2026
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Simon Brown | Senior Director of Public Relations
California Unanimously Passes Bill to Protect Small Businesses from Subprime Mortgage-Style Abuses
Statements from the Responsible Business Lending Coalition (RBLC), its members, and allies on the passage of California AB 2116
“Practices from the subprime mortgage foreclosure crisis are now targeting small business owners at a very large scale. We applaud the legislature’s unanimous votes to close loopholes that have allowed California businesses to be harmed by financing that the Federal Reserve calls ‘higher-cost and less-transparent’ and the SBA has called ‘extortionists,’" said RBLC Executive Director Louis Caditz-Peck.
“Details on AB 2116 can be found on the support letter for the bill. It will enable the state to kick out bad actors who take advantage of small businesses and more effectively enforce the six other small business financial protection laws that the Responsible Business Lending Coalition has already worked with the legislature to pass.”
Suli Kenyatta, Northern California Outreach Manager at Small Business Majority, also had this to say:
“AB 2116 would ensure consistent oversight so that all financing providers play by the same rules. This is especially important as small businesses navigate challenging business conditions today, including unprecedented federal cuts to sources of small business funding. That’s why it’s more important than ever for California to have a fair and transparent financial marketplace where good actors compete fairly and small businesses can safely access capital, and it’s past time for small business owners to be protected from clauses in merchant cash advance contracts that use legal threats to silence small business owners if they’ve been victimized. We urge Gov. Newsom to quickly sign AB 2116 to help protect small businesses from abusive financial practices so they can continue to grow and thrive.”
"California must hold companies that offer merchant cash advances accountable for taking advantage of small business owners like me,” said Paloma Corona, owner of Little Sprouts Language Immersion Preschool in Los Angeles. “Several years ago, I received a $9,500 merchant cash advance that included a daily rate of 13%. But the terms of that agreement meant I had to make daily payments of $117, which added up to an estimated APR of 170% over the life of the contract. Such high interest is not sustainable for small businesses like mine. In fact, my merchant cash advance caused me so much stress that I could hardly eat or sleep for a time. Fortunately, after learning about other sources of capital from Small Business Majority, I was eventually able to obtain a loan that came with a clear APR and no surprises. Other business owners should not have to experience what I did, which is why we need legislation like AB 2116."
Carolina Martinez, CEO of CAMEO Network, another of the bill’s sponsors, shared that:
"Our community lenders have reported that MANY borrowers fall prey to MCAs, from a Thai restaurant on Hollywood Boulevard bleeding more than $50,000 per month, to an East Bay retailer paying over $7,000 a month. When possible, the lenders are refinancing these predatory financing arrangements and drastically cutting monthly payments, greatly improving bottom lines and the sustainability of businesses. AB 2116 will give oversight of this type of financing so that small borrowers have better financing options. We are grateful to Assemblymember Schiavo for championing responsible small business lending and bringing AB 2116 to the governor's desk."
Shelmun Dashan, Deputy Director of bill sponsor California Low-Income Consumer Coalition (CLICC) commented:
“CLICC represents low-income clients who are often doubly targeted with predatory loans as consumers and as small business owners. We applaud the California legislature passing AB 2116 with bipartisan support to stamp out commercial financing that preys on business owners and destabilizes communities.”
Note: AB 2116 has now passed both the California Senate and Assembly unanimously and now heads to Gov. Gavin Newsom’s desk.
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About the Responsible Business Lending Coalition
The Responsible Business Lending Coalition (RBLC) is the leading cross-sector voice on small business financial protection. The coalition includes nonprofit and for-profit CDFIs, fintechs, investors, and small business advocates that share a commitment to innovation in small business lending and serious concerns about the rise of irresponsible small business lending. The coalition created the Small Business Borrowers' Bill of Rights, the first cross-sector consensus on the rights that small business owners deserve and what financing providers, brokers and lead generators can do to uphold those rights. Over 100small business lenders, brokers, civil rights and community groups, and advocacy organizations have endorsed these standards.
Members of the Responsible Business Lending Coalition include Accion Opportunity Fund, the Aspen Institute, Camino Financial, Community Investment Management, the National Community Reinvestment Coalition, Opportunity Finance Network, Small Business Majority, Association for Enterprise Opportunity, CAMEO Network, Hansa, ICA Fund, Pacific Community Ventures, Partnership for Financial Equity, and Working Solutions. For more information, visit www.borrowersbillofrights.org.