As of 2026, six US states have enacted commercial financing disclosure laws that apply to merchant cash advances. Each requires funders to provide specific cost-disclosure language at the time of offer, including APR-equivalent figures despite MCAs not being technically loans. Below: the state-by-state requirements and what each means for your contract.
California — SB 1235 (effective December 2018, regulations effective December 2022)
The first state to enact a commercial financing disclosure requirement. Applies to commercial financing transactions of $500,000 or less to California-based businesses.
Required disclosures:
- Total amount of funds provided
- Total dollar cost of financing
- Term length
- Method, frequency, and amount of payments
- Description of any prepayment penalties
- Annualized rate calculated using DFPI's prescribed formula (an APR-equivalent for non-loan products)
Applies to MCA funders providing capital to CA-based businesses. Failure to provide proper disclosures opens the funder to enforcement action by the California Department of Financial Protection and Innovation (DFPI).
New York — FAIR Act (Commercial Financing Disclosure Law, effective February 2024)
NY's commercial financing disclosure law passed in 2020, with regulations finalized in 2023 and effective implementation in February 2024. Applies to commercial financing transactions of $2.5 million or less to NY-based businesses.
Required disclosures (similar to CA but with some additional items):
- Total amount of financing
- Total dollar cost
- Term
- Method, frequency, amount of payments
- Annual percentage rate using NY DFS's prescribed APR-equivalent calculation
- Estimate of additional fees
- Funder's contact information
NY also famously banned out-of-state Confessions of Judgment in 2019, which materially changed the MCA enforcement landscape in NY.
Virginia — Commercial Financing Act (effective July 2022)
Applies to commercial financing transactions of $500,000 or less to VA-based businesses. Disclosure requirements similar to CA + NY.
Notable: Virginia requires registration with the State Corporation Commission for non-bank commercial finance providers, in addition to disclosure.
Utah — Commercial Financing Disclosure Act (effective January 2023)
Applies to commercial financing of $1 million or less to UT-based businesses. Disclosure requirements track the CA/NY model.
Notable: Utah's act has a registration requirement for finance providers AND a broker registration requirement (separate from the funder requirement).
Connecticut — Public Act 23-201 (effective July 2024)
The most recent of the major-state disclosure laws. Applies to commercial financing of $250,000 or less to CT-based businesses. Disclosures parallel the other states.
Florida — Commercial Financing Disclosure Act (effective January 2024)
Applies to commercial financing of $500,000 or less to FL-based businesses. Florida's disclosure framework is somewhat lighter than CA/NY but still requires APR-equivalent disclosure on commercial advances.
What this means for the merchant
If you're located in any of these six states, your MCA contract must include the prescribed disclosures. The disclosure documents are typically a separate page or section of your contract, sometimes signed separately. Read them — the APR-equivalent figure is often eye-opening (40-90% APR range for typical MCA pricing).
The disclosures are protective for you in three ways:
- Cost transparency. The total dollar cost is spelled out in the same document. No "monthly fee structure" obscuring true cost.
- APR-equivalent comparison. The figure lets you compare against bank loans, SBA loans, business credit card APRs apples-to-apples.
- Prepayment penalty visibility. Any prepayment cost has to be disclosed upfront, not buried.
What if you're in a non-disclosure state
If your business is in any of the other 44 states (no current commercial financing disclosure law), your MCA contract may have less prescribed disclosure language. That doesn't mean you're getting a worse deal — but it does mean the comparison data isn't required to be presented in standardized form.
Best practice in non-disclosure states: ASK the funder for the equivalent disclosures voluntarily. Reputable funders provide them. Funders that refuse are signaling something.
What's coming next
Several states have introduced commercial financing disclosure bills in 2024-2025 sessions: Texas, Massachusetts, Maryland, Illinois, New Jersey. The trend is toward more state-level regulation, modeled on the CA/NY framework. Expect 8-10 states with disclosure requirements within 2-3 years.
At the federal level, no commercial financing disclosure law currently exists. The CFPB has explored guidance but hasn't enacted formal requirements as of 2026. State-level remains the regulatory framework.
Sources & References
- Bank denial and small business credit access figures cited in this piece are derived from the Federal Reserve Small Business Credit Survey. Approval rates for small business credit applications at large banks have ranged from approximately 13%-31% across recent survey years, depending on bank category and reporting period.
- Small business finance landscape and lending program data: SBA Office of Advocacy.
- Merchant cash advance industry standards and disclosure practices: Small Business Finance Association (SBFA).
- Commercial financing disclosure regulations referenced (NY FAIR Act, CA SB 1235/666/362, VA, UT) are summarized from the published statutes; consult counsel for specific compliance application.