Regulation
What your merchant cash advance provider is legally required to tell you
Ten states now force providers of merchant cash advances and other sales-based financing to hand you a written cost disclosure before you sign. Here is which states, what has to be on the page, and how to read it.
Which states require merchant cash advance disclosures?
As of September 2026, ten states require some form of written disclosure on commercial financing, including merchant cash advances: California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah and Virginia. What must be disclosed varies by state, but the common core is the total amount funded, the total amount you will repay, the total dollar cost of the financing, and the payment schedule. California goes furthest and requires the cost to be expressed as an annual percentage rate. There is no federal disclosure rule for merchant cash advances — the revised federal small business lending rule finalised in 2026 explicitly carved them out — so your protections depend entirely on which state the transaction falls under.
The short version
Commercial financing has historically sat outside consumer lending law. A merchant cash advance is not technically a loan — it is a purchase of future receivables — so the Truth in Lending Act disclosures that come with a car loan or a mortgage have never applied to it. States have spent the last five years closing that gap one legislature at a time.
| States with a disclosure law | 10 — California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah, Virginia |
|---|---|
| Typical disclosure floor | Total funded, total repayment, total dollar cost, payment schedule, prepayment terms |
| States requiring an APR | California |
| Federal rule | None. Merchant cash advances are excluded from the revised Section 1071 small business lending rule |
| Florida threshold | Transactions of $500,000 or less |
| Florida penalties | Up to $20,000 aggregate, or up to $50,000 for violations continuing after written notice |
If you are shopping for an advance, the practical takeaway is this: in ten states you are entitled to a sheet of paper that states, in dollars, what the money costs. Ask for it before you sign. In the other forty, ask anyway — a provider who will not put the total dollar cost in writing is telling you something.
What counts as sales-based financing
Most of these laws use the term sales-based financing rather than merchant cash advance, because the label on the product is not what matters. The definition generally captures any arrangement where you receive a lump sum and repay it as a percentage of your revenue or receipts, rather than on a fixed schedule.
That sweeps in merchant cash advances, revenue-based financing, receivables purchases and split-funding arrangements. It usually does not reach fixed-payment term loans, equipment leases, real-estate-secured lending, or factoring structured as a true sale of specific invoices — though the boundaries differ by state, and a product marketed under one name can fall under the definition of another.
Two providers can quote what looks like the same deal, and only one of them is in a state that makes them show you the total dollar cost. The offer that looks cheaper is sometimes just the one that discloses less.
Florida: the rules where we are based
RAN Funding is headquartered in Pembroke Pines. Florida’s Commercial Financing Disclosure Law came out of House Bill 1353, took effect on 1 July 2023, and has applied to covered transactions since 1 January 2024.
What it covers
Commercial financing transactions of $500,000 or less. Anything above that figure is outside the law. A number of other carve-outs apply, including financing secured by real property, leases, purchase money obligations, floor plan financing, federally insured depository institutions, and providers completing five or fewer Florida transactions in a year.
What a provider must disclose
- The total amount of funds provided
- The amount actually disbursed to you after any deductions or withholding
- The total amount you will owe the provider
- The total dollar cost — the difference between what you owe and what you received
- The manner, frequency and amount of each payment
- A statement of any cost or discount that applies if you prepay
What it does not require
Florida does not require the cost to be expressed as an annual percentage rate. You get the total dollar cost, which is genuinely useful, but converting that into a rate you can compare against a term loan is left to you. We cover how to do that conversion below.
Teeth
Fines run to $20,000 for all aggregated violations, rising to $50,000 for violations that continue after the provider receives written notice. There is no private right of action under the Florida statute, which means enforcement comes from the state rather than from a lawsuit you bring yourself.
The other nine states
The remaining nine laws share the same broad shape and differ in the detail. Some apply only to sales-based financing; others reach a wider set of commercial financing products. Several have de minimis exemptions for providers doing very little business in the state, and several now pair disclosure with a registration requirement.
| State | Notes |
|---|---|
| California | Requires the cost to be presented as an annual percentage rate, and restricts misleading use of the words “interest” and “rate”. Annual provider reporting is due by 15 March. |
| Connecticut | Transaction-level disclosures for sales-based financing, with a de minimis exemption. |
| Virginia | Transaction-level disclosures for sales-based financing, with a de minimis exemption. |
| Texas | Sales-based financing only. In force since September 2025, with provider registration required by 31 December 2026 and no de minimis exemption. |
| New York | Commercial Financing Disclosure Law requires cost disclosure. New York separately restricted confessions of judgment against out-of-state defendants in 2019, which changed collection practice across the industry. |
| Georgia, Kansas, Missouri, Utah | Each has enacted a disclosure requirement. Scope, thresholds and registration duties vary; check the current statute for the state your transaction falls under. |
We have deliberately not published specific thresholds for Georgia, Kansas, Missouri and Utah here. The professional summaries we relied on do not state them, and a wrong number in a piece like this is worse than no number. If your transaction is in one of those states, ask the provider which statute they are disclosing under.
California: the one state that makes providers show an APR
California is the outlier worth understanding even if you never borrow there, because it is the model other states get compared against.
Under California’s regime, as amended by SB 362, a provider must present the cost of financing as an annual percentage rate — not just a total dollar cost, and not a factor rate. The law also restricts the misleading use of terms like “interest” and “rate”, and requires the APR to appear whenever a provider states a charge, a pricing metric or a financing amount. Providers file an annual report by 15 March. Enforcement is real: a consent order was issued in November 2025.
If your state gives you a total dollar cost but no APR, you can get close on your own. A $50,000 advance at a 1.20 factor rate means $60,000 repaid — $10,000 of cost on $50,000 borrowed, or 20% of the amount advanced. The catch is time: pay it back over six months and that 20% is an annualised cost well north of 40%; stretch it over eighteen and the annualised figure falls. A factor rate does not compound and does not change, which is exactly why it cannot be compared to an APR without doing this arithmetic. We walk through the full conversion here.
Texas: the live deadline
Texas HB 700 applies to sales-based financing and has been in force since September 2025. It requires disclosure of the total amount financed, the finance charge, the total repayment amount, all potential fees and the repayment terms.
Two features make it stricter than most. There is no de minimis exemption, so a provider cannot avoid the law by doing only a handful of Texas deals. And providers must register by 31 December 2026 — a date that falls inside this year. Regulators are not permitted to set a maximum APR, so this is a disclosure regime rather than a rate cap.
Why there is no federal rule
It is reasonable to assume Washington handles this. It does not.
The federal small business lending data rule under Section 1071 of the Dodd-Frank Act was finalised in revised form in 2026, and it explicitly excludes merchant cash advances. The rule describes the excluded product as a lump-sum payment in exchange for a percentage of future sales or income up to a ceiling amount — which is a merchant cash advance by any other name. Loans under $1,000 and agricultural lending are also excluded.
The rest of the rule was narrowed too. Coverage now begins at institutions originating at least 1,000 covered transactions to small businesses in each of the two preceding calendar years, up from a proposed threshold of 100. A small business is now one with gross annual revenue of $1 million or less, down from $5 million. Data collection does not begin until 1 January 2028, with the first reports due 1 June 2029.
Two things follow. First, Section 1071 is a data-collection rule for lenders, not a disclosure you will ever receive — so it would not have helped you compare offers anyway. Second, for merchant cash advances specifically, state law is the whole of your protection. Which state you are in genuinely determines what you are owed in writing.
How to read a disclosure you have been handed
If you receive one, four numbers matter more than the rest.
- Amount disbursed, not amount funded. These differ when fees are withheld at origination. The disbursed figure is the money that reaches your account.
- Total amount owed. One number, in dollars. Everything else is a way of describing it.
- Total dollar cost. Owed minus funded. Compare this across offers before you compare anything else.
- The prepayment line. Whether early payoff saves you money, costs you money, or does nothing. On a fixed factor rate, paying early usually saves you nothing at all — unless the agreement specifically provides a discount.
Then ask one question the disclosure will not answer: what happens if revenue drops. A percentage-based holdback flexes with sales, which is the product working as designed. A fixed daily debit does not.
Common questions
Do merchant cash advance disclosure laws apply to my transaction?
It depends on the state governing the transaction and its size. Ten states have a disclosure law, and thresholds vary — Florida’s applies to transactions of $500,000 or less, for example. Ask the provider which state’s statute they are disclosing under, and ask before you sign rather than after.
Is an APR required on a merchant cash advance?
Only in California, which requires the cost of commercial financing to be presented as an annual percentage rate. Other states with disclosure laws generally require a total dollar cost instead. Because a factor rate does not compound and does not change with time, converting it to an APR requires knowing how quickly you will actually repay.
What happens if a provider does not give me a disclosure?
That depends on the state. In Florida, fines run to $20,000 for aggregated violations and up to $50,000 for violations continuing after written notice, but there is no private right of action, so enforcement comes from the state rather than from a suit you bring. Other states differ, and some pair disclosure duties with registration requirements that carry their own consequences.
Does the CFPB regulate merchant cash advances?
Not through the small business lending data rule. The revised Section 1071 rule finalised in 2026 explicitly carved merchant cash advances out, describing them as a lump sum exchanged for a percentage of future sales up to a ceiling. Section 1071 is in any case a reporting obligation for large lenders rather than a disclosure you would receive.
Sources
- State Commercial Financing Disclosure Laws: Recent Developments and Compliance Considerations — Venable LLP, March 2026
- Florida Enacts Commercial Financing Disclosure Law Requiring Consumer-Style Disclosures — Winston & Strawn
- CS/HB 1353 Commercial Financing Product Brokers, bill analysis — The Florida Senate
- CFPB Issues Final Section 1071 Rule: Narrower Scope, Later Compliance Date — Consumer Financial Services Law Monitor, May 2026
- Small Business Lending Under the Equal Credit Opportunity Act (Regulation B), final rule — Federal Register, 1 May 2026
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