California, New York, and Connecticut introduced new constraints on confessions of judgment and personal guarantee enforcement in 2025–2026. The lender response is uneven.
California AB 247, NY's existing COJ restrictions, and a Connecticut bill expected to pass in mid-2026 are collectively reshaping the personal-guarantee enforcement landscape for SMB credit. Confessions of judgment have been functionally retired for borrowers domiciled in these states.
Lender response varies. Some specialty MCA funders have stopped originating in restricted states entirely. Others have shifted to traditional litigation paths with arbitration clauses and consent-to-jurisdiction provisions.
California SB 1235, NY CFDL, and similar laws in Virginia, Utah, and Georgia create APR-equivalent disclosure obligations at offer time. Compliance burden for multi-state originators is non-trivial; some funders have built specialty compliance teams or exited certain states.
Twelve-month default rates on 2026 originations are tracking 80 bps below the 2023 vintage at the same seasoning point, with the largest improvement in services and B2B.
Funders that adopted soft-pull pre-qualification in 2025 are reporting 2.3x higher application-to-funding conversion and materially lower CAC than peers still gating with hard pulls.
Falling SBA fees and faster PLP processing have changed the math. For tickets under $500K with weaker collateral, 7(a) is now structurally cheaper than conventional term once total cost of capital is measured.
