The legislative environment around merchant cash advances shifted more in the last two years than it had in the preceding decade. State legislatures, confronted with constituent complaints and a growing body of case law suggesting that MCA products were functioning as unregulated loans, responded with a sequence of statutes that are reshaping how funders operate, disclose, and collect. Six of those legislative actions carry consequences that business owners should understand.

Texas HB 700

Texas enacted HB 700 in the summer of 2025, and the statute did more than impose disclosure requirements. Providers and brokers must register with the Office of Consumer Credit Commissioner. Disclosures must include total funds provided, total repayment amounts, and estimated annual percentage rates. But the provision that drew the most attention from the funding industry was the voiding of confession-of-judgment clauses in commercial sales-based financing contracts.

A confession of judgment, for those unfamiliar, permits a funder to obtain a court judgment against a merchant without notice, hearing, or opportunity to contest. Texas declared those provisions unenforceable. The statute also prohibits automatic ACH debits unless the provider holds a first-priority perfected security interest in the merchant’s account. Implementing rules are expected by September 2026, and the commission’s interpretive latitude remains a source of anxiety for funders.

California SB 362

California had already established the template with SB 1235 in 2018. SB 362, signed in 2025 and rolling into full effect in January 2026, tightened it. The statute prohibits providers from using the terms “interest” or “rate” in contexts that could mislead a merchant about the cost of capital. Whenever a provider quotes a price, fee, or financing amount following a specific offer, the annual percentage rate must appear alongside it.

The practical effect is to prevent the factor-rate pricing model from functioning as a mechanism of obfuscation. A factor rate of 1.35 communicates almost nothing to a business owner unfamiliar with MCA pricing conventions. An APR of 80 percent communicates with uncomfortable clarity. SB 362 requires the latter.

New York’s FAIR Business Practices Act

Effective February 2026, the FAIR Act amended General Business Law Section 349 to extend protections against unfair and abusive commercial practices to small businesses and nonprofits. The old framework required a showing that the challenged conduct was “consumer-oriented,” a threshold that MCA funders had exploited to argue their commercial transactions fell outside the statute’s reach.

The amendment eliminated that defense. For MCA companies litigating in New York, the exposure profile changed overnight. Practices that had survived challenge under the prior version of Section 349 now face scrutiny under a broader standard, and the early enforcement signals suggest the Attorney General’s office intends to use the expanded authority.

Combined with the Yellowstone Capital settlement, which delivered over a billion dollars in judgments and debt relief, the message from New York to the MCA industry is unambiguous.

Connecticut’s Ongoing Reform

Connecticut became the jurisdiction of choice for MCA collection actions after New York restricted confessions of judgment against out-of-state borrowers in 2019. Funders gravitated to Connecticut because state law permitted prejudgment remedy waivers, a contractual device that allowed a funder to direct the borrower’s bank to freeze all accounts without judicial review at the onset of collection proceedings.

A 2023 reform restricted that mechanism for cash advances under two hundred fifty thousand dollars. Some MCA attorneys found interpretive pathways around the restriction. Now, a bill with bipartisan support from more than two dozen cosponsors is advancing through the legislature, with a vote expected before May 2026. The measure would close the remaining gaps that allow prejudgment asset freezes to proceed without meaningful judicial oversight.

For a business owner in Georgia or Arizona whose MCA contract names Connecticut as the governing jurisdiction, this legislation matters. The choice-of-law provision in your contract was not incidental. It was strategic.

Louisiana’s Revenue-Based Financing Statute

Louisiana’s statute, effective August 2025, requires disclosure for any agreement under which a business sells or forwards a percentage of its sales, revenue, or income where the payment obligation fluctuates with volume. The definition captures the core MCA structure with precision.

What distinguishes Louisiana from other states is the absence of exemptions. No carve-outs by transaction size, entity type, or annual volume. Every provider serving Louisiana businesses must comply, regardless of how small the advance or how infrequent the provider’s Louisiana transactions. In an industry accustomed to exploiting definitional gaps and de minimis thresholds, the breadth of the statute is distinctive.

Missouri’s Licensing Mandate

Missouri’s Commercial Financing Disclosure and Licensing Act, effective February 2025, requires MCA providers to obtain a license from the Division of Finance before operating in the state. The disclosure requirements track the California model. The licensing requirement does not.

In disclosure-only states, a noncompliant funder faces penalties. In Missouri, a funder without a license may find its contracts voidable. The distinction is enormous for a merchant in default on an MCA issued by an unlicensed provider. The enforceability of the agreement itself becomes contestable, which transforms the negotiating posture in any collection dispute or lawsuit.

These six legislative actions reflect a pattern that is accelerating rather than stabilizing. The industry’s window for operating in a regulatory vacuum is closing, state by state, provision by provision. For business owners already bound by MCA agreements, the relevant question is whether any of these new protections apply retroactively or prospectively to their specific contracts. That analysis requires examining the governing law clause, the date of execution, and the transitional provisions of each statute. A first call is where the conversation begins.

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