Los Angeles Apparel and Logistics
3 Paths Under California SB 362

The advance was priced in a factor rate the owner never converted to an annual figure, and by the time the second and third advances stacked atop the first, the true cost of the money had disappeared behind language the statute now forbids.

California Senate Bill 362 supplies three paths for Los Angeles apparel and logistics businesses caught in that stack, and each path runs through pricing language rather than around it.

Coverage and the Transparency Failure Behind the Bill

Opaque pricing leaves small business capital markets inefficient, and the Legislature said so in the findings that open the bill, findings that describe daily and weekly rate figures and fee rate quotations diverging materially from annual percentage rates.

The chaptered text of the California bill builds on the earlier disclosure framework that has required annual percentage rate disclosure at the single offer moment since the first in the nation mandate, and the new provisions extend the discipline from that moment into every later pricing statement made during the application process.

The underlying duty reaches specific offers of commercial financing of five hundred thousand dollars or less to recipients whose businesses are principally directed or managed from California, with content varying by product across term loans, sales based advances, factoring, leases, and asset based facilities.

The DFPI account of the commercial financing disclosure regime confirms the scope the bill tightens, and an apparel importer or logistics operator carrying stacked advances of the covered size sits inside it.

Landed cost pressure from duties the importer owes even where a broker handled entry squeezes the same cash that services the advances, a documented responsibility rather than a market rumor, and the squeeze explains why pricing clarity is an extremely practical concern for these trades.

You sign the stack and then you discover what the stack costs.

First Path: The Deception Ban and the Running APR Restatement

A provider may no longer use the words interest or rate in any way that could reasonably mislead the recipient about cost, and the test is objective likelihood rather than proven intent, so factor rate language that reads as an annual price is the paradigmatic violation.

The published summary of the strengthened commercial financing provisions describes the same prohibition the bill text enacts, and counsel should read the two together before advising that any particular quotation complies.

After extending a specific offer, whenever the provider states any charge, pricing metric, or financing amount for that offer during the application process, it must in the same breath state the annual percentage rate by name, converting a one time disclosure into a running disclosure that follows every later price mention, a discipline that would have changed the arithmetic of every stacked advance this office has reviewed, though the files informing that observation were chosen by need rather than by method.

To be exact about the mechanism, and precision matters here, the restatement duty attaches to the offer already extended, not to general advertising, which is why the first task in any dispute is to fix the date and content of the specific offer before arguing about anything said after it.

A quotation that never restates the annual figure after the offer date violates the rule on its face, and the violation survives any later claim that the merchant understood the pricing anyway.

Second Path: The True Annual Pricing Safe Harbor

Ordinary bank style annual pricing remains lawful, and the bill says so expressly.

The safe harbor provisions of the California bill protect cost figures stated as genuine annual interest rates or annual percentage rates, fixed or floating for the financing period, including margins over an index, and preserve the good faith estimated rate variance protection where the estimate rested on proper regulatory guidance.

A funder that reprices the stack as a stated annual rate with margin mechanics (which counsel for the industry will describe as operationally impossible for sales based product, though nothing in the text exempts that product) removes the deception exposure at a stroke.

There are exceptions to every safe harbor, though in practice they tend to confirm the discipline rather than defeat it.

A restatement of the stack into this channel is an extremely efficient settlement outcome, and counsel should test it before litigating the old quotations.

Third Path: The Two Track Remedy and the Settlement Posture

Violations travel one of two enforcement roads, and the road determines which regulator answers the complaint.

Where the offending financing sits under the California Financing Law and the violator holds the license, the violation counts as a Financing Law violation with the examination and enforcement apparatus that status entails, and where the financing sits outside that perimeter, the same conduct is deemed an unfair, deceptive, or abusive act under the consumer financial protection division with its associated remedies.

The former blanket examination hook was repealed to clear the way for this dual structure, a legislative choice that rewards precise jurisdictional analysis, and counsel that files with the wrong division loses months the merchant does not have.

The operative date mechanics, cure provisions, any private right of action, and penalty amounts were not stated in the inspected chaptered text beyond boilerplate, and I am less certain about the remedy timeline than the preceding paragraphs might suggest, so current DFPI guidance must be checked before any deadline is promised.

Delancey Street offers a free confidential initial review for businesses carrying stacked commercial advances, and the Delancey Street statement of its settlement practice describes a settlement company rather than a law firm, with legal questions reserved to independent counsel engaged separately. The goal is to ensure the offer documents, the pricing quotations, and the restatement record are reviewed and analyzed together before any complaint or offer issues, and to protect and preserve the disclosure claims that careless correspondence might waive.

Simply route every funder communication through counsel upon engagement, and ensure no admission about understood pricing reaches the other side, even casually, before counsel compares the quotations against the annual figures.

The bill does not reduce a single balance. It changes what balances built on misleading prices are worth in negotiation. That is the whole of the opportunity.