Disclosure States Explained: A Guide for Funders

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 Failing to meet disclosure requirements can expose your business to regulatory penalties, rescinded agreements, or reputational risks.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.

Key Takeaways for Funders

• There are approximately 10 disclosure states, with thresholds ranging from $250,000 to $2,500,000.
• If a transaction is equal to or below the threshold, a disclosure must be issued.
• Use one universal disclosure form across states, just add New York’s required statement to all of them for peace of mind.
• Always stay updated on evolving laws, especially in states like New Jersey that are still pending.
• Transparency is more than compliance; it’s a competitive advantage that builds trust with merchants.

What Are Disclosure States?

“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:

• The total repayment amount
• Fees or costs associated with the funding
• Estimated term or expected duration
• APR or equivalent rate (when applicable)
• The amount of funding provided

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.

Why Disclosure Laws Matter for Funders

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:

• Regulatory investigations or fines
• Legal disputes over contract validity
• Potential suspension of operations within the state
  

Beyond legal risk, clear disclosures also enhance merchant trust. Transparency builds credibility and strengthens long-term relationships, both vital in a competitive funding landscape.

State-by-State Disclosure Thresholds (2025 Overview)

Each disclosure state sets its own transaction threshold. If a deal amount is equal to or below the threshold, a disclosure form must be provided. If the deal exceeds the threshold, the disclosure requirement does not apply.

Several states now enforce specific transaction thresholds for commercial financing disclosures, including MCAs, factoring, and small business loans. California requires disclosures for deals up to $500,000, applying broadly to MCAs, factoring, and small-business lending under DFPI oversight. New York mandates disclosures for financing up to $2,500,000, and funders must include the statement: “You are not required to accept the financing offered.”

In Virginia, the threshold is $500,000, covering sales-based financing and certain commercial loans. Utah sets its limit at $1,000,000 and requires funders to register and provide clear disclosures before issuing funds. Connecticut uses one of the strictest thresholds at $250,000, applying to all commercial financing below that amount.

Georgia also uses a $250,000 threshold and focuses heavily on transparency in small business credit products. North Carolina sets the level at $500,000, with active enforcement expected soon for qualifying transactions. New Jersey has a proposed $500,000 disclosure requirement pending final approval, and funders are advised to prepare for compliance.

Kansas recently adopted a $500,000 threshold aligned with other small-business finance rules. Finally, Florida imposes a $500,000 limit and has adopted disclosure rules similar to California’s, covering MCAs and small business loans.

Note: These thresholds may change as states amend their laws or issue new regulations. Funders should always confirm current requirements before closing deals.

Using a Single Disclosure Form Across States

To simplify operations, many funders now use a single, standardized disclosure form that can be applied across all 10 states.

This form should include:

• The required financial metrics (amount, cost, repayment terms)
• A clear format that meets or exceeds the most stringent state requirements

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.

Multi-State Compliance Tips for Funders

Operating in multiple states requires careful tracking of local laws and filing requirements. To stay compliant, consider these best practices:

1. Maintain a Disclosure Checklist: Track each state’s threshold, effective date, and form language.
2. Centralize Record-Keeping:  Store all executed disclosure forms digitally for easy audit access.
3. Review Templates Quarterly: Laws and regulations evolve; periodic review prevents outdated documentation.
4. Train Internal Teams: Ensure underwriting and sales teams understand when disclosures are required.
5. Consult Legal Counsel: Work with an MCA Attorney to verify that your disclosure templates meet each state’s latest standards.
   

How MCA Funders Can Streamline Disclosure Compliance

Compliance doesn’t have to slow down deal flow. Modern solutions can make disclosures fast and efficient.

• Digital Disclosure Platforms: Automate form generation, signature collection, and storage.
• Compliance Management Software: Integrates disclosure tracking into your CRM or funding system.
• Legal Automation Tools: Ensure each document version automatically includes state-specific language like New York’s required clause.

Automation not only helps maintain accuracy but also enhances transparency and trust during the funding process.

Monitoring Proposed and Emerging Disclosure States

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.

Conclusion

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.

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Frequently Asked Questions

1. What is a disclosure state?

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.

2. Do all states require disclosure forms for commercial financing?

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.

3. What happens if a deal exceeds the state’s disclosure threshold?

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.

4. Is there a special requirement for New York?

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.”

5. How can funders simplify multi-state compliance?

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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