22655.
(a) Any person who engages in the business of commercial financing shall, at the time of offering the commercial financing subject to this section, provide to the prospective borrower a written statement showing in clear and distinct terms all of the following with respect to that transaction:(1) A full disclosure of the total amount of any fees charged in connection with the commercial financing. This shall be labeled “Total Amount of Fees” in the disclosure.
(2) The total amount of funds provided by the commercial financing. This shall be labeled “Total Amount of Funds Provided” in the disclosure.
(3) The annual
percentage rate (APR) for the commercial financing calculated according to the provisions of federal Truth In Lending Act (15 U.S.C. Sec. 1601 et seq.) and Regulation Z (12 C.F.R. 226.1 et seq.). In the case of a cash advance, the annual percentage rate shall be calculated based on the daily, weekly or monthly delivery of receivables from the business to the financer that is assumed as part of the financing offer. This shall be labeled “APR” in the disclosure.
(4) The term length of the commercial financing, displayed in months or years. This shall be labeled “Term Length of Financing” in the disclosure.
(5) The total monthly payment amount owed by the prospective borrower under the commercial financing. This shall be labeled “Total Monthly Payment” in the disclosure.
(6) The total dollar cost of the commercial
financing to the prospective borrower. This shall be labeled “Total Dollar Cost of Financing” in the disclosure.
(7) The annualized interest rate, if applicable. This shall be labeled “Annualized Interest Rate” in the disclosure.
(8) A description of the funding and repayment process, including the frequency of payments and the amount of each payment. This shall be labeled “Funding and Repayment Process” in the disclosure.
(9) A description of prepayment policies. If the commercial financing includes prepayment penalties, the description shall describe how those penalties apply, using examples relevant to the transaction being negotiated. This includes any financing costs or fees that are required to be paid at the time the loan is retired or paid in full. This shall be labeled “Prepayment Policies” in the
disclosure.
(10) Any collateral required as a condition of receiving the commercial financing. This shall be labeled “Collateral” in the disclosure.
(b) The statement required by this section shall be signed by all parties to the commercial financing before the commercial financing may be consummated.
(c) The statement required by this section shall be in writing, display the information required in the exact order of priority listed in subdivision (a), in at least 10-point type, in the same language principally used in any oral discussions or negotiations leading to execution of the commercial financing, and shall not be vague, unclear, or misleading.
(d) For purposes of this section, “commercial financing” means all of the following:
(1) A commercial loan, as defined in Section 22502.
(2) Accounts receivable financing or factoring in which the total amount provided by that financing or factoring is five thousand dollars ($5,000) or more as part of an agreement requiring the business to pay the financer a portion of accounts receivable collected by the financer on behalf of the business or to sell those accounts receivable to the financer at a discount.
(3) A cash advance to a business of five thousand dollars ($5,000) or more as part of an agreement requiring the business to repay the lender a portion of future receipts.
(4) A line of credit to a business of five thousand dollars ($5,000) or more.