AB 2116 Wasn't Written for Bridge Lenders. Here's Why They Should Still Pay Attention

California’s AB 2116 looks, at first glance, like a law that private real estate lenders can mostly ignore.

The legislation is aimed largely at smaller commercial financing transactions, including products commonly associated with factoring, merchant cash advances, revenue-based financing, and other forms of business-purpose capital. For lenders whose core business is fix-and-flip, rental, or commercial bridge lending secured by real estate, the natural reaction is that this belongs in someone else’s compliance file.

For the core loan product, that is largely correct. But private lenders should not stop the analysis there.

AB 2116 creates new licensing and compliance requirements under the California Financing Law for certain commercial financing providers and brokers. The substantive provisions take effect January 1, 2028, with licensing required beginning July 1, 2028. While real-property-secured transactions are generally outside the new commercial financing chapter, the law can still affect products and funding relationships that sit around a traditional RTL or bridge lending business.