Assemblywoman Schiavo’s Small Business Protection Bill Heads to Governor’s Desk

SACRAMENTO, CA - Assemblywoman Pilar Schiavo announced today that her Protect Small Business from Predatory Lending Act (AB 2116) has passed the California Legislature and is headed to the Governor's desk. Similar legislation has been introduced at least three times in recent years, but previous efforts stalled before receiving final legislative approval.

"Small business owners deserve the same basic expectation that when they seek financing to keep their doors open, grow their business, or make payroll, they will not be trapped by predatory practices," said Assemblywoman Pilar Schiavo. "Small businesses are the heart of our communities. They create jobs, support families, donate to local causes, and make our neighborhoods places people want to call home. After multiple attempts to get these protections across the finish line, we have gotten further than ever before."

When small business owners are looking for financing, they sometimes turn to options other than traditional bank loans to keep their businesses running or help them grow. But these financial products can come with far fewer protections and extremely high costs. One analysis cited by the federal Consumer Financial Protection Bureau found that they can carry an average annual interest rate of 94 percent, with one reaching as high as 358 percent. And other recent reporting has found effective interest rates as high as 2,900%.

For small business owners, those numbers can mean the difference between successfully expanding and losing everything they have built.

Earlier this year, Assemblywoman Schiavo sat down with small business owners and financing experts to discuss the real-world impact of these practices. Among them was childcare provider Paloma Carona, who described turning to a merchant cash advance to help expand her preschool to a second location. She believed she was agreeing to financing at a 13 percent rate. The equivalent APR was actually approximately 235 percent, putting enormous pressure on the preschool's cash flow and nearly forcing the business to close. Watch Paloma share her story and Assemblywoman Schiavo's full conversation with small business owners and financing experts here.

"Paloma's story is exactly why this bill matters," Assemblywoman Schiavo said. "She was trying to do what we want every small business owner to be able to do: grow, create jobs, and serve more families. Instead, financing that should have helped her nearly destroyed the business she had worked so hard to build. We cannot allow bad actors to hide behind complicated products and fine print while small businesses pay the price."

"We're pleased that this Chamber-supported legislation has passed the senate and will make it to the Governor's desk. Small businesses need access to capital they can trust, with clear terms and a level playing field. AB 2116 brings greater transparency and accountability to commercial financing while helping protect business owners from abusive practices that can put their companies and livelihoods at risk," said Ivan Volschenk, President/CEO of the Santa Clarita Valley Chamber of Commerce. "We appreciate Assemblywoman Schiavo's leadership on this important issue for our small businesses and encourage Governor Newsom to sign AB 2116 into law."

"We've seen an increase in merchant cash advances touting 'quick funding solutions for tariff issues' or other offers to help retailers navigate the 'ongoing impact of global tariffs and international trade tensions.' This type of financing is predominantly predatory and routinely offers effective interest rates of more than 100 percent. That's why California's small business owners need AB 2116, which provides them with stronger oversight and protection," said Carolina Martinez, CEO of CAMEO Network, one of the bill's sponsors. "We are grateful to Assemblymember Schiavo for championing responsible small business lending and bringing AB 2116 to the Governor's desk."

The Protect Small Business from Predatory Lending Act will strengthen protections for small businesses by:

• Bringing covered commercial financing providers and brokers under state licensing and oversight.
• Giving state regulators greater ability to identify and address bad actors.
• Establishing clear standards for businesses offering commercial financing to small businesses.
• Prohibiting abusive practices that can allow financing companies to seize control of a business owner's finances before a default.
• Creating a more level playing field for responsible financing companies that already follow fair lending practices.

The Governor has until September 30th to sign the legislation.

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Assemblywoman Pilar Schiavo was elected to the California State Assembly in November of 2022 and re-elected in 2024 to represent the 40th Assembly District, representing the Northwest San Fernando Valley, Val Verde, Castaic and the Santa Clarita Valley. Upon her election, she was appointed as Assistant Majority Whip by the Speaker of the Assembly and now serves as Chair of the Assembly Committee on Military and Veterans Affairs. During her first term she brought back a record $100 million district investments in school and community safety, seniors meal programs, veteran housing, domestic violence services and creating local jobs. Prior to her election, Assemblywoman Schiavo was a Nurse Advocate and Small Business Owner who worked in the labor movement for more than 20 years. Throughout her career, Assemblywoman Schiavo helped deliver healthcare, including reproductive healthcare, to more than one million people. In the Northwest San Fernando Valley, she co-founded an organization that helped secure housing for Veterans experiencing homelessness, has delivered more than 50,000 meals to people in need, and increased resources to help keep our communities safe. Assemblywoman Schiavo lives in Chatsworth with her creative kid where they love to hike in the Santa Susana Mountains.