State-by-State MCA Regulation: 6 Checks Starting With California, Texas, and New York

Merchant cash advances are expensive in the best conditions. If your business hits hard times, repaying daily can suffocate you. Right now, eleven states have commercial financing disclosure laws. But the rules in three states matter more: California, Texas, and New York. To see where you stand, check these six things.

These states make companies who give out loans or Merchant Cash Advances disclose how much the borrower will pay back, so they can compare options. No part of California’s commercial financing law applies unless your business is principally managed or directed from California. Sales-based financing includes merchant cash advances. California requires disclosures for financing deals $500,000 or less. Texas for offers under $1 million; New York for merchant cash advance offers of $2.5 million or less. Be aware that the effective date of the new rules may exclude older contracts from coverage. California’s rules took effect December 9, 2022. New York’s compliance date was August 1, 2023. Texas HB 700 took effect September 1, 2025 for most of its rules.

If you are in California or New York, the lender should disclose the Annual Percentage Rate (APR). In California, if you receive an offer and not a random rate quote, it must include an APR. Some states use a total-cost model instead of annual percentage rate, APR. Since August 1, 2025, Louisiana also requires lenders to provide a written disclosure for revenue-based financing. Do not expect factor rates to do the trick. Be wary of lenders who refuse to disclose an APR. Look at the cash you actually receive. Compare total payback amounts. Consider size and frequency of payments. Pay close attention to prepayment terms.

Confessions of Judgment

For you as a borrower, confessing judgment makes life hard. Texas bars confessions for sales-based financing, including merchant cash advances. New York amended its laws on confession of judgment in 2019, so out of state businesses are protected because a confession must state the county where the business has a place of business. California’s Assembly Bill 2116 bans confessions of judgment and power of attorney taken out before a California business defaults. But it will not go into effect until January 1, 2028, and it will only affect loan contracts signed on or after that date.

Registration for Providers and Brokers

You might assume the funder is registered with a government agency. Texas requires it; California and New York do not. Texas law requires registration for providers and brokers of commercial financing, including merchant cash advances, with the state’s Office of Consumer Credit Commissioner. Applications opened September 1, and entities must register by December 31, 2026. Brokers arrange financing and don’t make loans directly. Some states require Brokers to register too: Virginia, Connecticut and Missouri. Virginia commercial finance law took effect in 2022 and requires both brokers and lenders to register with the State Corporation Commission. Under Virginia’s law, a contract cannot require in-person arbitration out-of-state unless that is where your business is located. Utah registers providers, not brokers.

Beyond registration, check direct debits: for cash advance providers, they are handy. But they may be unlawful depending on where you live. In Texas, as of July 9, 2026, a company that provides you with sales-based financing can automatically debit your bank account, only if it has a perfected first-priority security interest in all of your receivables.

Civil Penalties

In Texas and New York, state agencies enforce the commercial lending laws. In New York, wilful violations can lead to civil penalties of up to $10,000 per violation. The Texas penalty is also $10,000 per violation, with no private right to sue. A business there can only contact the Texas Office of Consumer Credit Commissioner, the agency that enforces the law, and ask them to step in.

The New York Attorney General has actively pursued merchant cash advance providers in the past. For instance, in January 2025, it obtained a $1.065 billion judgment against Yellowstone Capital, a merchant cash advance provider. It was an eye-catching amount, but the real news for merchants was that the judge also cancelled over $534 million in outstanding debts.

Vermont is another state to watch. Its commercial lending law passed in June 2026, and its commercial financing sections take effect July 1, 2027.

If you are in one of these states, and you are struggling to make your daily payments, consider your options. Understand your state’s law. After that, keep careful records. Communicate with your funder if repayment becomes difficult.