Most business owners assume that a financial product carrying a six-figure price tag arrives with regulatory guardrails. With merchant cash advances, that assumption collapses the moment one examines the actual statutory framework. Federal law offers nothing specific. The states, as they often do when Congress declines to act, have begun constructing their own protections. Seven of those efforts deserve particular attention.
California SB 1235 and SB 362
California moved first. SB 1235, signed into law in 2018, required commercial financing providers to deliver written disclosures before a business signed a contract. The disclosures include the total amount of funds provided, the total repayment amount, the estimated annual percentage rate, and the payment schedule. For merchants accustomed to receiving MCA offers with no standardized cost comparison, the effect was immediate and clarifying.
SB 362, which took effect in stages through 2025 and into January 2026, strengthened the regime. Providers can no longer deploy the words “interest” or “rate” in misleading contexts. When a provider quotes a price, fee, or financing amount after extending a specific offer, the APR must appear alongside it. The statute treats obfuscation as a form of deception, which, for anyone who has reviewed the factor rate pricing conventions common in the MCA industry, feels overdue.
New York’s Disclosure Framework and the FAIR Act
New York’s approach has been layered. The state first restricted confessions of judgment against out-of-state borrowers, closing a mechanism that MCA funders had used to obtain uncontested judgments in New York courts against merchants who had never set foot in the state. The commercial financing disclosure law followed, requiring providers to deliver standardized information about total costs and repayment obligations.
The real shift arrived on February 17, 2026, when the FAIR Business Practices Act took effect. By amending General Business Law Section 349, the statute extended protections against unfair and abusive practices to small businesses and nonprofits, eliminating the previous requirement that enforcement actions demonstrate a consumer-oriented impact.
For MCA funders operating in New York, the FAIR Act altered the litigation calculus. Conduct that might have survived challenge under the old framework now carries exposure under a statute with teeth.
Virginia’s Registration Requirement
Virginia’s commercial disclosure law, effective July 2022, took a narrower approach. It applies to sales-based financing transactions under five hundred thousand dollars and requires providers to register with the Virginia State Corporation Commission. The registration requirement is the distinguishing feature. A funder who fails to register cannot legally offer MCAs to Virginia businesses.
The statute also mandates upfront disclosures about financing terms and prescribes specific dispute resolution procedures. Virginia did not attempt to regulate pricing. It regulated access and transparency, which, for an industry that had operated without either, represented a meaningful constraint.
Utah’s Private Right of Action
Utah requires anyone completing more than five commercial financing transactions per calendar year to register with the Department of Financial Institutions. The disclosure obligations mirror the California model in their essentials. What sets Utah apart is the enforcement mechanism.
Violations of the disclosure requirements create a private right of action. An affected business can pursue damages in state court without waiting for a regulator to initiate enforcement. In states where disclosure statutes exist but enforcement budgets do not, the practical effect of those statutes can be marginal. Utah addressed that problem by handing the enforcement power to the merchants themselves.
Texas HB 700
Texas enacted HB 700 in 2025, and the scope of the statute surprised some observers. Providers and brokers must register with the Texas Office of Consumer Credit Commissioner. Disclosure requirements cover total funds provided, total repayment amounts, estimated annual percentage rates, and payment schedules. But the statute went further.
Contract provisions functioning as confessions of judgment are void and unenforceable under the new law. Automatic ACH debits from merchant accounts are prohibited unless the provider holds a first-priority perfected security interest. The implementing rules are due by September 2026, and the industry is watching closely to see how broadly the commission interprets its authority.
I spoke with a business owner in Houston last spring who had signed three stacked MCAs before HB 700 passed. He described the experience of reading the disclosure documents for a fourth offer, filed under the new regime, as seeing the price of something he had already purchased three times.
Louisiana’s Revenue-Based Financing Statute
Effective August 2025, Louisiana requires providers of “revenue-based financing transactions” to deliver written disclosures to recipients before contract execution. The definition captures any agreement under which a commercial enterprise sells or agrees to forward a percentage of sales, revenue, or income where the payment obligation fluctuates with volume.
Louisiana’s statute is notable for what it does not exclude. Other states carved out exemptions by transaction size, entity type, or financing volume. Louisiana applied its requirements without exemption. Every MCA provider serving Louisiana businesses, regardless of dollar amount, must comply.
Missouri’s Licensing Framework
Missouri combined disclosure requirements with a licensing mandate. Under the state’s Commercial Financing Disclosure and Licensing Act, MCA providers must obtain a license to operate in the state. The distinction matters. In disclosure-only states, a noncompliant funder faces penalties but can still execute contracts. In Missouri, an unlicensed provider’s contracts may be voidable.
The practical implication for a business owner who signed an MCA with an unlicensed Missouri provider is significant. The enforceability of the agreement itself comes into question, which alters the posture of any subsequent collection dispute.
These seven states represent the leading edge of MCA regulation, but the direction of movement is visible in statehouses elsewhere. Connecticut and Kansas adopted commercial financing requirements in 2024. Others are drafting. The regulatory vacuum is filling, though it fills unevenly and with gaps that leave merchants in many states without protections that their counterparts in California or New York now take for granted.
Understanding which protections apply to your specific transaction requires examining the governing law provision in your contract and the state where your business operates. A consultation is where that analysis begins.
