California Contractor Financing Guide
CSLB licensing, strict disclosure laws, and platform requirements
California has some of the strictest contractor regulations in the nation. This guide covers everything you need to know to offer customer financing legally and compliantly.
California's Strict Compliance Requirements
California has the most stringent contractor licensing and consumer protection laws in the United States. Violations can result in license suspension, fines up to $5,000, and criminal prosecution.
This guide covers CSLB requirements, SB 784 (2026) dealer fee disclosures, and Business & Professions Code §7159 home improvement contract requirements.
CSLB Licensing Requirements
All Contractors MUST Be CSLB Licensed
California requires contractor licensing for ANY work over $500 (including labor and materials). Unlicensed contractors cannot legally offer financing, collect payment, or enforce contracts.
License Verification: All financing platforms verify CSLB licenses before approval.
Common License Classifications
Class B - General Building Contractor
Most versatile license - can perform or subcontract any construction work requiring two or more unrelated trades.
- 4 years journeyman experience
- Pass Law & Business exam (120 questions)
- Pass Trade exam (90 questions)
- $25,000 contractor bond
- $15,000 workers' comp bond or proof of insurance
Class C Specialty Contractors
Most common for HVAC, roofing, solar, landscaping, etc.
Installation, service, repair of HVAC systems
All types of roofing installation and repair
Solar panel and solar water heating systems
Landscape construction, irrigation, outdoor living
Requirements: Same as Class B (4 years experience, exams, bond)
Insurance Requirements for Financing Approval
While CSLB doesn't mandate specific insurance amounts, financing platforms typically require:
- General Liability: $1,000,000 per occurrence / $2,000,000 aggregate (minimum)
- Workers' Compensation: Required if you have employees (mandatory 2028 for all contractors)
- Commercial Auto: $1,000,000 if company vehicles are used
- Umbrella Policy: $2,000,000+ recommended for larger projects
Verify Your CSLB License
Before applying to financing platforms, verify your license is active and in good standing.
Check License Status →Financing Platforms Available in California
All major platforms operate in California but have strict CSLB verification and compliance requirements.
GreenSky
Top Tier
Focus: Large home improvement projects ($5K-$100K+)
Approval Rate: ~75% for qualified customers
Deferred Interest: 6-24 months same-as-cash options
California Requirement: Must comply with SB 784 dealer fee disclosures (effective Jan 1, 2026)
Minimum Requirements:
- 2+ years in business
- Active CSLB license
- $1M+ GL insurance
- Professional website required
- Provider fee: 6-8%
Synchrony HOME
Top Tier
Focus: Major home improvement ($3K-$75K)
Approval Rate: ~70-75%
Deferred Interest: 6-60 months promotional financing
California Requirement: Must comply with SB 784 dealer fee disclosures
Minimum Requirements:
- 2+ years in business
- Active CSLB license with no disciplinary actions
- $1M+ GL insurance
- Professional online presence
- Provider fee: 6-10%
PowerPay
Mid-Tier
Focus: HVAC-specific ($2K-$50K)
Approval Rate: ~80-85% (more lenient)
NO deferred interest: Fixed APR installment loans only
California Advantage: No dealer fee = simplified SB 784 compliance
Minimum Requirements:
- 1+ year in business
- Active CSLB license (C-20 preferred)
- $500K+ GL insurance acceptable
- NO provider fees (contractor-friendly)
SB 784: Dealer Fee Disclosure Requirements (Effective January 1, 2026)
NEW LAW: Mandatory Dealer Fee Disclosure
Starting January 1, 2026, California Senate Bill 784 requires lenders to disclose "dealer fees" (also called "origination fees" or "participation fees") that contractors receive from financing platforms.
This disclosure must be completed BEFORE the customer signs ANY loan agreement.
What is a Dealer Fee?
A dealer fee is the percentage that financing platforms (like GreenSky or Synchrony) add to the customer's loan amount as compensation to the contractor for facilitating the financing.
Example:
- Job cost: $10,000
- Dealer fee: 7% ($700)
- Customer's loan amount: $10,700
- You receive: $10,000 (platform keeps the $700)
The customer pays interest on $10,700 even though the work only costs $10,000. SB 784 requires this be disclosed.
Required Disclosure Language
The lender must provide this disclosure in 14-point type or larger, and the customer must sign it before executing the loan:
DEALER FEE DISCLOSURE
"The amount of your loan may include a dealer fee that is not included as a finance charge for the purpose of calculating the annual percentage rate (APR) of the loan. This means that the true cost of this loan may be higher than indicated by the APR. If you seek financing from another lender that does not have a relationship with your contractor, the loan is unlikely to include a dealer fee but may have a higher interest rate or other finance charges."
Customer signature required before loan execution.
Platforms Without Dealer Fees = Simplified Compliance
Platforms like PowerPay do NOT charge dealer fees. The customer's loan amount equals the contract price, making SB 784 compliance simpler (disclosure still required, but states "no dealer fee").
This is one reason PowerPay is popular in California despite offering only fixed-rate loans.
Business & Professions Code §7159: Home Improvement Contract Requirements
BP&C §7159 applies to ALL home improvement contracts over $500. Violations can result in inability to enforce your contract, CSLB discipline, and fines up to $5,000.
Down Payment Restrictions
MAXIMUM DOWN PAYMENT: $1,000 OR 10%, WHICHEVER IS LESS
This applies to ALL home improvement work, including:
- Solar installations
- ADU (Accessory Dwelling Unit) construction
- Disaster rebuilding
- ANY work on residential dwellings
Your contract MUST include this language in 12-point bold type:
"THE DOWN PAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS."
Progress Payment Restrictions
You CANNOT collect payment for work not yet completed or materials not yet delivered.
Your contract MUST include in 12-point bold type:
"IT IS AGAINST THE LAW FOR A CONTRACTOR TO COLLECT PAYMENT FOR WORK NOT YET COMPLETED, OR FOR MATERIALS NOT YET DELIVERED."
Required Contract Elements
Every home improvement contract in California must include:
- ✓ Heading "HOME IMPROVEMENT" in 10-point bold type
- ✓ Contractor name, business address, and CSLB license number
- ✓ Start date and estimated completion date
- ✓ Description of work to be performed
- ✓ Total contract price
- ✓ Down payment restrictions notice (12-point bold)
- ✓ Progress payment restrictions notice (12-point bold)
- ✓ Three-day right to cancel notice (if applicable)
- ✓ Mechanics lien warning
- ✓ Insurance disclosure
What You Can (and Cannot) Say About Financing
Federal TILA/Regulation Z requirements apply nationwide, but California has ADDITIONAL state-specific restrictions under BP&C §7159 and SB 784.
CRITICAL: Deferred Interest Is NOT "Same as Cash"
Never call a deferred interest promotion "same as cash." This is one of the most common compliance violations and can result in CSLB discipline in California.
California courts have ruled that misleading financing statements constitute grounds for contract rescission.
What You CANNOT Say
"Same as cash"
(unless it's a true 0% APR loan with no deferred interest)
"No interest"
(when deferred interest applies)
"Free financing"
(there's always a cost, even if not immediately apparent)
"Everyone gets approved"
(credit decisions are made by lenders)
"Guaranteed approval"
(you cannot guarantee credit decisions)
What You CAN Say (Compliant Examples)
"Promotional financing available with 18 months deferred interest."
(Then explain what deferred interest means)
"Typical APRs range from 7.99% to 24.99% depending on creditworthiness."
"No prepayment penalties - pay off early without extra fees."
Train Your Sales Team
In California, contractors are liable for misrepresentations made by employees, subcontractors, or anyone acting on their behalf.
Everyone who discusses financing with customers must understand TILA, BP&C §7159, and SB 784 requirements.
California Financing Compliance Checklist
Before Offering Financing
Licensing
- ☐ Active CSLB license in good standing
- ☐ Correct classification for work performed
- ☐ No pending disciplinary actions
- ☐ License number displayed on all marketing materials
Insurance & Bonding
- ☐ $25,000 contractor's bond filed with CSLB
- ☐ General Liability: $1M+ per occurrence
- ☐ Workers' Comp (if employees)
- ☐ Insurance certificates name financing platform as additional insured
Contract Compliance (BP&C §7159)
- ☐ "HOME IMPROVEMENT" heading in 10-point bold
- ☐ CSLB license number on contract
- ☐ Down payment restrictions notice (12-point bold)
- ☐ Progress payment restrictions notice (12-point bold)
- ☐ Start date and estimated completion date
- ☐ Three-day right to cancel notice (if applicable)
- ☐ Mechanics lien warning
SB 784 Compliance (Effective Jan 1, 2026)
- ☐ Lender provides dealer fee disclosure in 14-point type
- ☐ Customer signs disclosure BEFORE signing loan
- ☐ Copy of signed disclosure retained with contract
- ☐ Sales team trained on SB 784 requirements
Website & Marketing
- ☐ CSLB license number on homepage
- ☐ Professional website with project photos
- ☐ Financing options page with compliant language
- ☐ No misleading financing claims
- ☐ Contact information and business address visible
Need Help with California Compliance?
We'll build you a CSLB-compliant website with BP&C §7159 contract templates and SB 784-ready financing workflows.