Reviewed August 2026. Sources linked throughout.
Merchant cash advances occupy a regulatory gap. Because an MCA is structured as a purchase of future receivables rather than a loan, most of the lending rules a business owner would expect — rate caps, licensing, standardized cost disclosure — do not automatically apply.
Ten states have closed part of that gap with commercial financing disclosure laws. This page covers what each requires, who enforces it, and — the point most coverage gets wrong — what a violation actually gets you.
Credible Law is a national attorney referral network, not a law firm. Nothing here is legal advice. If you are facing a lawsuit, a frozen account, or a UCC lien, see MCA lawsuit defense.
The most important thing to understand about these laws
Business owners routinely arrive at a lawyer’s office having read that a missing disclosure voids their advance. In most states that is simply not what the statute says.
Both Florida and Utah — in nearly identical language — provide that their disclosure laws create no private right of action, and that a violation does not affect the enforceability or validity of the underlying transaction. Texas is the same: the law is not enforceable by private litigants. Enforcement belongs to the regulator, and the remedy is a civil penalty paid to the state, not relief for you.
| What a disclosure violation is actually worth It is leverage, not a defense. A documented pattern of non-compliance is a regulatory exposure a funder would rather not carry into a collection file, and it can move a settlement number. It does not cancel your obligation, and in most states you cannot sue on it. The defenses that can actually void an MCA are different: usury recharacterization, fraudulent inducement, unconscionability, and procedural defects in how a judgment was obtained. Those are covered further down. |
Which states require disclosure
As of early 2026, ten states require some form of commercial financing disclosure covering merchant cash advances: California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah, and Virginia. Legislation is pending in other states — New Jersey’s S.1760 would impose disclosure requirements across sales-based, closed-end, open-end, and factoring transactions, with civil penalties up to $10,000 for willful violations. (Source: Venable LLP, March 2026)
Texas, Connecticut, and Virginia are the three states with disclosure requirements written specifically for sales-based financing — the product category that includes merchant cash advances.
Every other state regulates MCAs through general commercial contract law, UCC Article 9, common law fraud and unconscionability, and — where a court finds the transaction is really a loan — state usury statutes.
California
Law: SB 1235 (2018), Financial Code §§ 22800–22807. DFPI regulations effective December 9, 2022. Amended by SB 362 (2025), Chapter 352, effective January 1, 2026.
California was first in the nation. SB 1235 requires providers of commercial financing of $500,000 or less, to businesses principally directed or managed from California, to deliver standardized disclosures before the recipient signs — total funds provided, total dollar cost, term, payment method and frequency, prepayment policy, and total cost expressed as an annualized rate.
SB 362 closed the sales-conversation gap. Under the original law the APR only had to appear once, at the offer stage; what a broker said on the phone was largely unconstrained. SB 362 requires providers to express interest as an APR, prohibits using the terms “interest” or “rate” in a manner that could reasonably mislead, and requires APR disclosure whenever a charge, pricing metric, or financing amount is stated to a prospective recipient.
Enforcement is the DFPI’s. In November 2025 the DFPI entered a consent order with a company that leased equipment to California businesses without providing required disclosures. Providers also file an annual report by March 15 covering the prior calendar year.
Texas
Law: HB 700 (2025), effective September 2025. Administered and enforced by the Texas Office of Consumer Credit Commissioner (OCCC).
Texas HB 700 is narrowly focused on sales-based financing — merchant cash advances specifically. Providers must deliver written disclosure including the total amount financed, the finance charge, the total repayment amount, all potential fees, and the repayment terms.
Registration: providers and brokers must register with the OCCC by December 31, 2026, and renew annually. Unlike Connecticut and Virginia, Texas has no de minimis exemption for low-volume providers.
Enforcement: not enforceable by private litigants. The OCCC may seek civil penalties up to $10,000 per violation. The statute expressly bars the Texas Finance Commission from adopting a maximum APR, finance charge, or fee — this is a disclosure law, not a rate cap. Exemptions cover banks, financing secured by real property, seller-financed transactions, and technology service providers to exempt entities.
Utah
Law: SB 183 (2022), the Commercial Financing Registration and Disclosure Act, Utah Code Title 7 Chapter 27. Signed March 24, 2022; key provisions effective January 1, 2023.
Utah was the first state to impose a registration requirement on providers of accounts receivable purchase transactions — the statutory category that captures merchant cash advances. Providers must register with the Utah Department of Financial Institutions and renew annually.
Utah does not require an APR disclosure. This distinguishes it from California and New York and is frequently misreported. The Act applies to commercial financing transactions of $1 million or less, and a “provider” is anyone consummating more than five commercial financing transactions in Utah in a calendar year.
No private right of action. The Act is enforced by the Department. A violation does not affect the enforceability of the underlying agreement. Civil penalties run $500 per violation, capped at $20,000 for all violations arising from the same transaction disclosures, with higher penalties for continued violations after notice.
Florida
Law: Commercial Financing Disclosure Law, Fla. Stat. §§ 559.961–559.9615. Signed June 26, 2023, effective July 1, 2023, applying to transactions consummated on or after January 1, 2024.
Section 559.9613 requires written disclosure at or before consummation — total amount of financing, amount disbursed after withheld fees, itemization of deductions, and related terms. Section 559.9614 separately restricts broker conduct, including collecting advance fees.
Section 559.9612 excludes transactions above $500,000 from the disclosure requirements entirely.
Section 559.9615 gives the Florida Attorney General exclusive enforcement authority, states that the part creates no private right of action, and provides that a violation does not affect the enforceability or validity of the underlying transaction. Penalties are $500 per incident to a $20,000 aggregate cap, rising to $1,000 per incident and $50,000 after written notice from the Attorney General.
If your advance was funded before January 1, 2024, the Florida disclosure requirements do not reach it.
New York
New York matters for two separate reasons, and they are frequently conflated.
Confession of judgment reform. CPLR § 3218 was amended by S.6395, signed August 30, 2019, eliminating the use of confessions of judgment against debtors who are not New York residents. For a non-natural person, residence includes any county where it has a place of business. This substantially reduced New York’s role as the enforcement engine for out-of-state MCA collections — though contracts predating the amendment, and New York-resident businesses, are a different question.
The Commercial Finance Disclosure Law. New York’s CFDL imposes disclosure requirements on covered commercial financing transactions, including MCAs, and carries broker provisions. New York remains the designated forum in a large share of MCA agreements regardless of where the business operates, which is why New York procedure shows up in disputes nationwide.
Connecticut, Virginia, Georgia, Kansas, and Missouri
These five states also require commercial financing disclosure. Connecticut and Virginia, like Texas, have requirements written specifically for sales-based financing, and both include de minimis exemptions for low-volume providers that Texas does not.
EDITORIAL NOTE — DO NOT PUBLISH THIS LINE: the bill numbers, effective dates, and enforcement mechanics for these five states were not verified during this pass. Either verify each against the state statute and expand this section, or publish it at this level of generality. Do not fill the gap from memory — that is exactly how the Utah and Florida errors got onto the site.
Confession of judgment
A confession of judgment clause lets a funder obtain a judgment without notice or a hearing — the business pre-consents when it signs. For a business owner, the first sign of trouble is often a bank account that has already been restrained.
New York’s 2019 amendment to CPLR § 3218 is the single most significant change in this area, because New York was where the overwhelming majority of these filings happened. Other states restrict or prohibit COJ clauses in commercial contracts to varying degrees, and the rules differ enough that this is a jurisdiction-specific question rather than a general one.
Even where a COJ is valid on its face, courts have vacated judgments obtained through them — on grounds including defective affidavits, improper service, fraud, misrepresentation, and errors in the amount claimed.
When is an MCA actually a loan?
This is the question that can void an agreement, and it is where defense work concentrates.
Usury caps apply to loans. They do not apply to genuine purchases of receivables. So courts examine whether a given contract really transfers risk to the funder, or only claims to. Three factors drive the analysis:
- Reconciliation. Does the contract include a mechanism that genuinely adjusts payments downward when revenue falls — and is it usable in practice, or conditioned on documentation no operating business could produce on schedule?
- Absolute repayment. Must the business repay regardless of performance? A fixed obligation that survives a revenue collapse looks like a loan.
- Risk allocation. Do personal guarantees, security interests, and COJ clauses effectively guarantee the funder repayment no matter what happens to the business?
Where reconciliation is illusory and repayment is absolute, courts have recharacterized MCAs as loans and applied usury law — with consequences up to voiding the contract.
Cases that shaped the analysis
LG Funding, LLC v. United Senior Properties of Olathe, LLC — New York court held that an MCA whose reconciliation provision was practically impossible to use functioned as a loan for usury purposes.
Fleetwood Services, LLC v. Ram Capital Funding, LLC (2d Cir. 2023) — refined the standard for evaluating reconciliation provisions, holding that a provision is illusory where practical circumstances make it impossible or highly unlikely to invoke.
Davis v. Richmond Capital Group (S.D.N.Y.) — allowed fraud and RICO claims to proceed on allegations that funders systematically submitted fraudulent confessions of judgment and used deceptive practices post-judgment.
Federal law
FTC. Section 5 of the FTC Act reaches unfair or deceptive acts or practices in commerce, and the FTC has brought actions in the MCA space.
CFPB. Jurisdiction runs primarily to consumer financial products. Small business lending data collection under Section 1071 of Dodd-Frank is the point of contact with commercial financing.
RICO. Civil RICO claims have been brought against MCA operations in egregious fact patterns — difficult to prove, but not theoretical, as Davis shows.
TILA. Generally does not reach commercial financing. It can become relevant where a court finds a transaction was in substance a loan for personal rather than business purposes, which occasionally arises with sole proprietors whose finances are not separated.
Defenses that actually work
- Usury recharacterization — the strongest available argument where reconciliation is illusory and repayment is absolute.
- Fraudulent inducement — requires evidence: emails, recorded calls, marketing materials showing misrepresentation of cost or terms.
- Unconscionability — generally requires both an unfair process and unreasonably one-sided terms.
- Procedural defects — improper service, defective COJ affidavits, standing problems after an agreement is assigned. More common than most owners expect, and often the fastest route to relief.
- Breach by the funder — refusal to reconcile, misapplied payments, or collection conduct outside the contract can support counterclaims.
- Disclosure violations — real, but as described above: leverage in negotiation, not a private claim in most states.
Frequently asked questions
Which states regulate merchant cash advances?
Ten states require some form of commercial financing disclosure covering MCAs: California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah, and Virginia. Every other state regulates MCAs through general contract law, fraud and unconscionability doctrines, and usury law where a court finds the transaction is really a loan.
Does a disclosure violation void my advance?
In most states, no — and the statutes say so explicitly. Florida and Utah both provide that a violation does not affect the enforceability of the underlying agreement and that the law creates no private right of action. Texas is likewise not enforceable by private litigants. A violation is a regulatory matter with settlement value, not a defense that cancels the obligation.
Can I sue my funder for failing to disclose?
Under these disclosure statutes, generally not. Enforcement belongs to the state regulator — the DFPI in California, the OCCC in Texas, the Department of Financial Institutions in Utah, the Attorney General in Florida. Separate claims for fraud, misrepresentation, or breach of contract are a different matter and are not foreclosed by these statutes.
Does Utah require an APR disclosure?
No. Utah’s Commercial Financing Registration and Disclosure Act requires disclosure but, unlike California and New York, does not require an APR or similar rate disclosure. It does require providers to register with the Utah Department of Financial Institutions.
Does the Florida law apply to my advance?
Only if it was consummated on or after January 1, 2024, and only if it was $500,000 or less — § 559.9612 excludes larger transactions from the disclosure requirements.
Can a New York funder use a confession of judgment against my out-of-state business?
CPLR § 3218 was amended in 2019 to eliminate confessions of judgment against non-New York residents. For a business entity, residence includes any county where it has a place of business. Agreements predating the amendment, and New York-resident businesses, present different questions.
Can merchant cash advances violate usury laws?
Only if a court first determines the transaction is a loan rather than a genuine purchase of receivables. Courts examine whether reconciliation is genuine, whether repayment is absolute, and how risk is allocated. Where the analysis comes out as a loan, state usury caps can apply — with consequences up to voiding the agreement.
Are MCAs legal?
Yes, in every state. Whether a particular agreement is enforceable is a separate question that turns on the contract terms, the applicable state law, and the funder’s conduct.
If your business is facing MCA legal action
Credible Law is a national attorney referral network, not a law firm. We connect business owners with independent attorneys who handle merchant cash advance disputes — lawsuits, confessions of judgment, bank restraints, UCC liens, and settlement. There is no cost to be matched with counsel.
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Legal disclaimer
This page is general information, not legal advice, and no attorney-client relationship is created by reading it. Commercial financing law changes frequently; sources are linked throughout and reflect research current to August 2026. Consult an attorney licensed in the relevant jurisdiction about your specific situation.