traffic stop sign

Advisory to Small Businesses with Merchant Cash Advance Contracts

Español / Spanish

The Department of Financial Protection and Innovation (DFPI) expects that small businesses may struggle to make payments under existing loans or other financing products as a result of government-issued stay-at-home orders. The DFPI encourages small businesses to review the terms of their existing financing products to determine whether they may be entitled to relief and report finance companies that fail to honor contractual terms that provide relief.

Some small business financing providers in California provide financing in the form of “merchant cash advances” or “sales of future receivables” through which businesses receive cash up-front in exchange for “selling” a portion of their future revenue.  Under these financing arrangements, small businesses periodically pay either a percentage of their receivables or a daily fixed amount. 

Payments under these financing arrangements are typically adjustable and may be lowered if the small business is closed as a result of government orders.  However, in order to take advantage of these adjustments, a small business typically must inform the financing provider of the small business’s distress.  Further, in the case of merchant cash advance arrangements where a small business is required to submit a daily fixed amount, the small business typically has a right to “reconcile” their daily fixed payments to the business’s actual income with the effect that the small business’s daily payments would be reduced if the revenue of the small business has fallen.   

The DFPI urges struggling small business to review their financing contracts to assess their available relief options.  The DFPI also urges small businesses to contact the DFPI if financing providers fail to abide by the terms of their financing contracts. Small businesses may file complaints online at

Approved by [name] [month/year]

Help us improve the DFPI website! Share your feedback.


Last updated: Dec 5, 2022 @ 3:20 pm