What Happened
In a development that has not attracted sufficient industry attention, eleven commercial financing laws enacted to date require providers of certain types of commercial financing to disclose key terms to small businesses and other covered entities before a transaction is consummated. These requirements apply to providers of commercial financing transactions that are in amounts below certain thresholds, such as sales-based financing, closed-end and open-end commercial loans, factoring transactions, lease financing, accounts receivable purchases, and asset-based lending arrangements.
Why It Is Important
This post summarizes the salient elements of the of these eleven state laws that have been enacted to date in California, Connecticut, Florida, Georgia, Kansas, Louisiana, Missouri, New York, Texas, Utah, and Virginia, respectively, including a brief description of the coverage of the statutes as well as the notable exemptions and applicable disclosure and registration requirements. Some of these statutes also impose registration requirements upon lenders, and all of them subject violators to substantial penalties.
California
The California disclosure requirements took effect on December 9, 2022. With respect to California’s law, persons providing commercial financing (including small business loans and merchant cash advances) to recipients “whose business is principally directed or managed from California” are required to provide recipients with consumer-like disclosures, after the California Department of Financial Protection and Innovation issued final regulations in June 2022 to implement the California Commercial Financing Disclosure Law (“CCFDL”). Commercial financing providers are required to disclose to the recipient at the time of extending a specific commercial financing offer specified information relating to the transaction and to obtain the recipient’s signature on that disclosure before consummating the commercial financing transaction. The CCFDL exempts, among others, regulated depository institutions (banks, credit unions, etc.), transactions greater than $500,000 and real estate-secured commercial loans or financings. The California law otherwise applies to, among other things, commercial loans, certain commercial open-end plans, factoring, merchant cash advances, and commercial asset-based lending. Under the California law “provider” is primarily limited to entities that extend offers of commercial financing, such as lender/originators, but also includes a non-bank partner in a marketplace lending arrangement who facilitates the arrangement of financing through a financial institution.
Connecticut
On June 28, 2023, Connecticut enacted “An Act Requiring Certain Financing Disclosures,” which requires (1) providers offering “sales-based financing” (a/k/a revenue-based financing) in amounts of $250,000 or less to provide specified disclosures to applicants; and (2) mandates that providers offering sales-based financing register annually with the Connecticut Department of Banking starting by October 1, 2024. The Connecticut law authorizes the state banking commissioner to adopt promulgating regulations, and the law took effect on July 1, 2023. The Connecticut law applies to providers of commercial financings and defines “provider” as “a person who extends a specific offer of commercial financing to a recipient and includes, unless otherwise exempt … a commercial financing broker.” “Commercial financing” means any extension of sales-based financing by a provider not exceeding $250,000. Under the statute, “sales-based financing” is a “transaction that is repaid by the recipient to the provider over time” (1) as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the recipient’s sales or revenue, or (2) according to a fixed payment mechanism that provides for a reconciliation process that adjusts the payment to an amount that is a percentage of sales or revenue. Notably, the Connecticut law exempts the following entities and transactions: banks, bank holding companies, credit unions, and their subsidiaries and affiliates; entities providing no more than five commercial financing transactions in a 12-month period; real estate-secured loans; leases; purchase money obligations; technology service providers acting for an exempt entity as long as they do not have an interest in the entity’s program; transactions of $50,000 or more to motor vehicle dealers or rental companies; transactions offered in connection with the sale of a product that the person manufactures, licenses, or distributes.
Florida
Effective July 1, 2023, Florida enacted the Florida Commercial Financing Disclosure Law, which requires covered providers to furnish consumer-oriented disclosures to businesses for certain commercial non-real estate secured financing transactions exceeding $500,000. The Florida law applies to providers of commercial financing transactions and defines “provider” as a “person who consummates more than five commercial financings” in Florida during any calendar year. “Commercial financing transactions” include commercial loans, open-end lines of credit, and accounts receivable purchase transactions. The Florida law exempts the following entities and transactions: federally insured depository institutions, their subsidiaries, affiliates, and holding companies; licensed money transmitters; real estate-secured loans; loans exceeding $500,000; leases; and certain purchase money transactions. All financings made on or after January 1, 2024, must comply with this requirement.
Georgia
Effective January 1, 2024, Georgia amended its Fair Business Practices Act to require certain providers of commercial financings of $500,000 or less to furnish TILA-like disclosures to small-business borrowers before the consummation of the transactions. Transactions greater than $500,000 are exempt from the disclosure requirements. The Georgia law defines “provider” as “a person who consummates more than five commercial financing transactions” in Georgia during any calendar year, including participants in commercial purpose marketplace lending arrangements. “Commercial financing transactions” include both closed-end and open-end commercial loans as well as accounts receivable purchase transactions but do not include real estate-secured transactions. The Georgia law exempts federally insured depository institutions and their subsidiaries, affiliates, and holding companies; Georgia-licensed money transmitters; captive finance companies; and institutions regulated by the federal Farm Credit Act. Purchase money obligations are also exempt.
Kansas
The Kansas Commercial Financing Disclosure Act, which took effect July 1, 2024, applies to “commercial financing transactions” of $500,000 or less, defined to include any commercial loan, commercial open-end credit plan, lines of credit, and accounts receivable purchase transaction, with a business located in Kansas. A provider subject to the Kansas Act must disclose the following to the recipient of financing before, or at the time of, consummation: total amount of funds provided to the recipient; total amount of funds disbursed to the recipient; total of payments made to the provider; total dollar cost of financing for the recipient; manner, frequency and amount of each payment (or estimates if these terms may vary, along with the provider’s methodology for calculating variable payments and circumstances where payments may vary); and prepayment costs or discounts.
Louisiana
Effective August 1, 2025, Louisiana law requires provides of “revenue-based financing transactions,” defined as “an agreement under which a person engaged in a commercial enterprise sells or agrees to forward a percentage of sales, revenue, or income, and the person’s payment obligation increases and decreases according to the volume of sales made or revenue or income received,” to provide written disclosures to recipients of financing. Notably, Louisiana’s law is the first state commercial financing disclosure law that does not exempt any types of entities or transactions, regardless of dollar amount.
Missouri
Missouri Senate Bill 1359, which includes provisions for commercial lending disclosures, went into effect on February 28, 2025. The Missouri law prescribes that several disclosures be made for commercial financing transactions and applies to “providers” of commercial financing transactions, defined as a “person who consummates more than five commercial financings” to a business located in Missouri in any calendar year. “Commercial financing transactions” include any unsecured and secured commercial loan, accounts receivable purchase transaction, commercial open-end credit plan or each to the extent the transaction is a business purpose transaction. Exemptions from the Missouri law include the following entities and transactions: a depository institution or a subsidiary or affiliate; a service corporation to a depository institution that is owned and controlled by same and regulated by a federal banking agency; a lender regulated by the federal Farm Credit Act; real estate-secured loans; a lease; a licensed money transmitter; loans exceeding $500,000; and certain purchase money transactions. This law also contains a registration requirement for brokers.
New York
The New York Commercial Financing Disclosure Law (“NYCFDL”) took effect August 1, 2023, and is substantially similar to the California requirements. It requires “providers” of commercial credit to provide Truth-in-Lending Act-like disclosures to applicants at the time it extends a specific offer of the commercial financing in amounts of $2,500,000 or less. “Providers” include both lenders and brokers. The NYCFDL applies to closed end financing, open-end financing, sales-based financing, including merchant cash advances and factoring transactions. The NYCFDL provides a de minimis exemption, “for any person or provider who makes no more than five commercial financing transactions in [New York] in a twelve-month period.” Further, “Financial institutions”, which include banks, and certain other chartered depository institutions authorized to conduct business in New York, are also exempt from the new commercial loan disclosure law, but the subsidiaries or affiliates of such exempt financial institutions are not exempt. Commercial financings over $2,500,000 are exempt from the law as are transactions secured by real property. The obligation to provide disclosures apply if the financing recipient’s business is “principally directed or managed from New York.”
Texas
On May 28, 2025, the Texas legislature passed a “commercial sales-based financing” bill, known as House Bill 700, and Governor Greg Abbott signed the bill into law on June 20, 2025. Among other things, the Texas law requires disclosure of sales-based financing terms to recipients, and, starting December 31, 2026, registration for all sales-based financing providers and brokers with the Texas Office of Consumer Credit Commissioner. Registrants must renew their registrations annually by January 31. The legislation exempts from its requirements the following entities: banks (specifically including out-of-state banks) and their subsidiaries and affiliates, certain companies that provide tech services to exempt entities, lenders regulated under the Farm Credit Act, real property secured sales-based financing, true (operating) leases, and certain commercial sales-based financing agreement or commercial open-end credit plan of $50,000 or more. Financings greater than $1 million are exempt from the disclosure requirement. Unlike any other current state law, the Texas law also contains a provision prohibiting sales-based financing providers and brokers from establishing a mechanism for automatically debiting a recipient’s deposit account unless the provider or broker holds a validly perfected security interest in the recipient’s account under the Texas UCC, with a first priority against the claims of all other persons. Most provisions of the law became effective on September 1, 2025, except for the provider and broker registration requirement.
The Texas legislation, while part of a growing trend of augmented state regulation of commercial non-real estate secured commercial financing, is far more burdensome than other similar state laws enacted to date.
Utah
Effective January 1, 2023, the Utah law requires providers to register with the Utah Department of Financial Institutions and maintain such registration annually. Further, prior to consummation of the commercial financing, providers must, among other things, disclose to recipients: (i) the total amount of funds provided to the business; (ii) the total amount of funds disbursed to the business; (iii) the total amount paid to the provider under the financing; (iv) the manner, frequency and amount of each payment (or if the amount of each payment may vary, the manner, frequency and estimated amount of the initial payment); (v) information regarding prepayment of the financing; and (vi) the amount the provider paid to the broker, if applicable. The Utah law does not apply to consumer purpose transactions, real estate-secured transactions or transactions with loan amounts greater than $1 million—or if the provider makes five or fewer Utah commercial financings in any calendar year.
Virginia
The Virginia law, which took effect on July 22, 2022, includes some of the same type of disclosure requirements that other states discussed above have adopted, but it is limited to sales-based financing. Notably, the Virginia law requires sales-based financing providers to make disclosures of the financing terms on a prescribed form at the time the provider offers sales-based financing to a recipient—and requires them to register with the Virginia State Corporation Commission. The law exempts sales-based financings in amounts over $500,000 and contains a de minimis exemption for a person that enters into no more than five “sales-based financing” transactions in any 12-month period.
What to Do Now
It is anticipated that other states will enact similar laws in the future that will impact small balance commercial lending. Lenders must either comply with these nettlesome laws or structure their transaction to avoid triggering them.
