Small Business Loan Brokers Who Require California Licenses

By Joseph Coleman

The California Department of Financial Protection & Innovation has issued policy guidelines through FAQs to become a licensed broker for small business lending in the state of California.

What is a broker under the California Financing Law?
The definition of “broker” includes any person engaged in the business of negotiating or performing any act as broker in connection with loans made by a finance lender. A broker’s license under the California Financing Law only authorizes a broker to broker loans to lenders licensed as finance lenders. The license does not provide the broker with the authority to broker loans to and collect brokerage commissions from other types of lenders such as credit unions and banks. Therefore, a broker who seeks to broker loans to other types of lenders must ensure that the broker holds the necessary license to broker to the other type of lender, in circumstances where another license is required. Specifically, a broker licensed under the California Financing Law may also need a license under the Real Estate Law if the broker is brokering real estate loans to a lender not licensed under the California Financing Law.

How do I Apply for a California Finance Lender License?

A) For Companies Engaged in Residential Lending or Brokering:
In general, an applicant/licensee must:

Broker must have and maintain a $50,000 net worth; Lender/Broker must have and maintain a $250,000 net worth.
Obtain and maintain a minimum of $25,000 surety bond. The bond amount will be based on the amount of origination activities conducted by the licensee.
Have a history absent any criminal history or history of sanctions by any regulatory agency resulting from dishonesty, fraud or deceit.
Have a plan of business consistent with the business of finance lender.
An application for a license under the California Financing Law for persons engaging in residential lending or brokering must be filed through the Nationwide Multistate Licensing System (NMLS). Select “Getting Started” on the NMLS Resource Center page.

For information specific to a new application under the California Financing Law, refer to the New Application Checklist for a California Financing Law License.

B) For Companies Engaged in Non-Residential Lending or Brokering:
In general, an applicant/licensee must:

Broker must have and maintain a $25,000 net worth.
Obtain and maintain a $25,000 surety bond.
Have a history absent any criminal history or history of sanctions by any regulatory agency resulting from dishonesty, fraud or deceit.
Have a plan of business consistent with the business of finance lender.
An application for a license under the California Financing Law for persons engaged in non-residential lending or brokering may be filed through the Nationwide Multistate Licensing System (NMLS). Select “Getting Started” on the NMLS Resource Center page.

How Do I Obtain a License for a Branch Office?
Prerequisites for license applications
A criminal background check of the person responsible for the lending activities at the location, i.e. branch manager, is required.

An application for a license under the California Financing Law must be filed through the Nationwide Multistate Licensing System (NMLS).

A company must complete an NMLS Company Form (MU1) for a main license before applying for a branch license on the NMLS Branch Form (MU3).

To obtain a license for a branch office, a company must:

Submit an MU3 filing on NMLS; and
Submit all of the required information from the New Branch Application Checklist for the branch.
If a licensee is not yet on NMLS, the licensee must file the “Short Form” application with the Los Angeles office of the Department. A licensee must transition onto NMLS by December 31, 2021, and after transitioning, all branch office license applications must be submitted through NMLS.

Short Form Branch License Application (only for licensees not yet on NMLS).

California Finance Lenders License – Frequently Asked Questions

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