CALIFORNIA

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.

Licensing Platforms SB 784 Disclosures BP&C 7159 Lending Rules Compliance Checklist
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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.

C-20 (Warm-Air Heating, Ventilating & Air-Conditioning):

Installation, service, repair of HVAC systems

C-39 (Roofing):

All types of roofing installation and repair

C-46 (Solar):

Solar panel and solar water heating systems

C-27 (Landscaping):

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)

Wisetack

Mid-Tier

Focus: Small to mid-size projects ($500-$35K)
Approval Rate: ~75-80%
Fixed APR: 9.99-35.99% (no deferred interest)

Minimum Requirements:

  • 1+ year in business
  • Active CSLB license
  • $500K+ GL insurance
  • Provider fee: 2-6% (sliding scale)

Other Platforms Operating in California

  • Enhancify: Solar-focused, strict CSLB C-46 verification
  • Service Finance Company (SFC): Water treatment, HVAC, roofing
  • FTL Finance: Pool, landscape, outdoor living (C-27, C-53)

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.

Your Responsibilities as a Contractor

  • 1️⃣
    Coordinate with your lender: The lender (GreenSky, Synchrony, etc.) is responsible for providing the disclosure, but YOU must ensure it happens before the customer signs.
  • 2️⃣
    Do not accept loan signatures without the disclosure: If a customer signs a loan agreement without receiving the SB 784 disclosure, the loan may be voidable.
  • 3️⃣
    Keep copies: Maintain signed copies of the dealer fee disclosure with your contract paperwork.
  • 4️⃣
    Train your sales team: Anyone presenting financing options must understand SB 784 requirements.

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."

Note: This applies to financed projects too. Even if a financing platform disburses funds, you can only request payment milestones based on completed work.

Financing-Specific Contract Language

When offering financing, BP&C §7159 has additional requirements:

1. Down Payment Restrictions Apply to Financed Amounts

"The down payment and progress payment restrictions extend to advance payment in whole or in part from any lender or financier."

Translation: You can't use financing to circumvent the $1,000/10% down payment limit.

2. Finance Charge Disclosure

If you're arranging financing, you must disclose the finance charge in the contract.

3. Right of Rescission Notice

For home-secured loans (rare in home improvement financing), customers have 3 days to cancel.

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)
  • ✅ Statement: "You are entitled to a completely filled in copy of this agreement, signed by both you and the contractor, before any work may be started" (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 MUST Disclose

  1. 1. Dealer Fees (SB 784): Starting Jan 1, 2026, customers must receive written disclosure of dealer fees before signing loan documents.
  2. 2. Deferred Interest Terms: Clearly explain that if the balance isn't paid in full by the promotional period end, ALL deferred interest will be charged retroactively.
  3. 3. APR: The annual percentage rate must be disclosed prominently in financing materials.
  4. 4. Total Finance Charges: If you're arranging financing, disclose the total finance charges in the contract (BP&C §7159).
  5. 5. Your Relationship with the Lender: If you receive any compensation from the financing platform, this must be disclosed under SB 784.

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)
  • ❌ "No credit check required" (if a credit check is performed)
  • ❌ "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)
  • ✅ "Financing options from [Platform Name] with approval rates around 75% for qualified applicants."
  • ✅ "We partner with [Platform Name] to offer financing. If approved, you may qualify for promotional terms."
  • ✅ "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
  • □ Detailed work description
  • □ Total contract price clearly stated
  • □ Three-day right to cancel notice (if applicable)
  • □ Mechanics lien warning
  • □ Insurance disclosure

✓ 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

✓ TILA/Regulation Z (Federal)

  • □ Never call deferred interest "same as cash"
  • □ APR disclosed prominently
  • □ Deferred interest terms explained clearly
  • □ No "guaranteed approval" claims
  • □ Financing disclosures in writing

✓ 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.

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