SBA Loan Broker Weekly: Brokers Face Licensing, $25,000 Bond for California Loans

California has a new requirement for SBA loan brokers doing business with its small businesses: a $25,000 surety bond. And that’s just the beginning. Brokers arranging covered financing of $500,000 or less will also need a state license, a minimum $25,000 net worth and money for application fees. The licensing deadline is July 1, 2028.

Governor Gavin Newsom signed Assembly Bill 2116 on September 30, 2026, to regulate loan brokers who arrange commercial loans, merchant cash advances, factoring, and other non-real estate financing.

The law covers financing offers of $500,000 or less to small businesses with annual revenues of less than $16 million.

Which SBA Loan Brokers Must Be Licensed?

The $500,000 threshold matches the maximum SBA Express loan amount, making the law particularly relevant to brokers arranging smaller SBA loans.

AB 2116 does not provide an exemption for SBA lending.

However, the law expressly exempts commercial financing transactions secured by real property.

Banks and qualifying depository institutions have licensing exemptions.

Independent SBA loan brokers cannot automatically claim their lenders’ exemptions.

What Activities Require a License?

California defines commercial financing brokers by their activities, including:

Referring borrowers while transmitting sensitive financial information with an expectation of compensation.
Negotiating financing terms or advising borrowers using financial information.
Preparing financing applications and related documents.
Communicating financing approval decisions.
Charging borrowers fees for financing application services.

What Are the Licensing Requirements?

$25,000 minimum net worth, supported by financial statements.
$25,000 minimum surety bond. One bond covers a licensee operating multiple licensed locations. Regular employees acting within the scope of their employment do not need separate licenses or bonds solely because they perform work for the licensee.
$300 in application and investigation fees, plus fingerprint and background-check costs.
Annual regulatory assessment of at least $250 per licensed location.
Website disclosure of the average and maximum annual percentage rates for commercial financing transactions facilitated during the previous calendar year.

Two Important Dates

January 1, 2028: Effective date.

July 1, 2028: Brokers must be licensed or have submitted an application.

NASLB to Make Surety Bonds Available to Members

NASLB will source a surety bond provider and make coverage available to members in late 2027, ahead of California’s July 1, 2028 licensing deadline. Bond premiums will depend on each applicant’s qualifications.