As state-level regulation of commercial financing continues to expand, funders and alternative lenders face increasing compliance responsibilities. A growing number of U.S. states now require transparent disclosure forms for certain commercial transactions especially when offering merchant cash advances (MCAs), factoring, or small business loans.
Understanding these disclosure states and their specific thresholds is essential for any funder working across multiple jurisdictions. Failing to meet disclosure requirements can expose your business to regulatory penalties, rescinded agreements, or reputational risks.
This guide breaks down which states currently require disclosures, the deal thresholds that trigger them, and how to stay compliant with minimal disruption to your operations.
“Disclosure states” are U.S. states that have enacted laws requiring funders to disclose key financial details of a commercial financing offer before a merchant or borrower accepts it.
These details often include:
These laws are modeled after consumer protection standards, such as the Truth in Lending Act, but adapted for commercial financing. The intent is to promote transparency so that small business owners clearly understand the cost and structure of their financing before agreeing to it.
For funders, disclosure laws are not just a formality. They are a legal requirement that affects how deals are documented, closed, and reported.
Non-compliance can result in:
Beyond legal risk, clear disclosures also enhance merchant trust. Transparency builds credibility and strengthens long-term relationships, both vital in a competitive funding landscape.
To simplify operations, many funders now use a single, standardized disclosure form that can be applied across all 10 states.
This form should include:
For New York transactions, funders must include an additional sentence on the disclosure: “You are not required to accept the financing offered.”
By using a single template and adjusting it for New York, funders can reduce compliance complexity while ensuring all mandatory elements are present.
Operating in multiple states requires careful tracking of local laws and filing requirements. To stay compliant, consider these best practices:
Compliance doesn’t have to slow down deal flow. Modern solutions can make disclosures fast and efficient.
Automation not only helps maintain accuracy but also enhances transparency and trust during the funding process.
With several states (like New Jersey) still in the proposal phase, more jurisdictions are expected to join the list of disclosure states in the near future. Funders should monitor legislative updates in states such as Illinois, Maryland, and Texas, where commercial finance disclosure bills are under consideration.
By anticipating these changes, funders can proactively prepare templates and systems rather than reacting to new compliance demands after they take effect.
As commercial financing continues to grow, regulatory oversight will only increase. For funders, compliance with disclosure laws is no longer optional; it’s part of doing business responsibly. By understanding state thresholds, using a unified disclosure process, and staying alert to legislative changes, funders can confidently navigate these evolving requirements.
Disclosure compliance protects not only your business from risk but also strengthens your reputation as a transparent, trustworthy funding partner in the industry.
A disclosure state is a U.S. state that legally requires funders to provide clear financial disclosures to borrowers before they accept commercial financing. These laws ensure transparency and protect small businesses from hidden costs.
No, only certain states have enacted disclosure laws, currently approximately 10 states require it. MCA Funders must check each state’s thresholds to determine if a disclosure is required before funding a deal.
If the financing amount is above the state’s threshold, a disclosure form is generally not required. However, funders should always document the transaction carefully for internal compliance purposes.
Yes, in New York, aside from the other requirements, the disclosure form must include the sentence: “You are not required to accept the financing offered.”
Funders can use a single standardized disclosure form for all states and adjust it only where specific language is required, like in New York. Using digital forms and compliance software also reduces errors and administrative burden.
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