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MCA borrower rights under disclosure laws

California, New York, Utah, Virginia, and Georgia 2026 disclosure laws require funders to provide APR-equivalent, total dollar cost, prepayment terms, and finance charges in writing before signing on advances under $500K.

By Keerthana Keti5 min read

MCA borrower rights under disclosure laws are the legally enforceable rights small business owners have to receive standardized pricing disclosures before signing a merchant cash advance contract. Five US states have enacted these laws as of 2026, fundamentally changing how MCAs are sold to merchants in those jurisdictions.

The five-state landscape in 2026. Each law has slightly different triggers and content, but the core rights are similar:

  1. California (SB 1235, effective 2023, expanded 2025). Applies to all commercial financing under $500,000 in California. Funder must disclose: total amount of financing, total dollar cost, APR-equivalent, monthly payment estimate, and prepayment policies.
  2. New York (S5470-B, effective 2024). Similar to California, $500K threshold, plus avoiding-cost-of-financing disclosure if prepayment penalty applies.
  3. Utah (HB 425, effective 2023). $1M threshold, simpler disclosure — total cost, APR-equivalent, payment schedule.
  4. Virginia (HB 1027, effective 2024). $500K threshold, includes broker fee disclosure if commercial financing broker is involved.
  5. Georgia (HB 1090, effective 2025). $500K threshold, mirrors California closely but adds explicit broker compensation disclosure.

The merchant's rights — what must be disclosed before signing. Across all five states, six core elements:

  1. Total amount of financing. The lump-sum advance the merchant will receive (net of any origination fees).
  2. Total dollar cost. The full amount the merchant will repay over the term (advance × factor).
  3. APR-equivalent. The annual percentage rate calculated using a standardized formula (varies slightly by state — CA uses a specific actuarial method).
  4. Payment schedule. Estimated periodic payment amount, frequency (daily, weekly), and total number of payments.
  5. Prepayment terms. Whether the merchant can prepay, any prepayment discount or penalty, and how prepayment is calculated.
  6. Broker fees. If a third-party broker is involved, the dollar amount of the broker's commission (CA, VA, GA).

The merchant's remedies — what happens if disclosure is violated. Three remedies are typically available:

  1. Right to rescind. In some states (CA, NY), undisclosed material terms give the merchant a right to rescind the contract within a defined window (often 5 business days post-funding).
  2. Civil penalties. State attorneys general can impose penalties (CA: up to $2,500 per violation; NY: up to $10,000 per violation) and require disgorgement of profits on non-compliant deals.
  3. Private right of action. Some state laws (NY, VA) allow merchants to sue directly for damages and attorney's fees if disclosure violations cause financial harm.

The mechanics — what compliant disclosure looks like. Most 2026 MCA contracts in covered states include a standalone "Disclosure Statement" page presented to the merchant before signing. This statement typically uses a standardized format (often a table) showing the six required elements side-by-side with the contract terms. Merchant must sign or initial the disclosure separately from the contract.

The strategic insight — what merchants should know. Four points:

  1. Disclosure is your shopping tool. APR-equivalent disclosure makes MCAs comparable to bank loans for the first time — use it to compare funder offers on an apples-to-apples basis.
  2. The disclosure must come BEFORE you sign. If a funder provides disclosure only after signing, that is a violation; document the timing.
  3. Out-of-state funders are still covered. A New York funder doing business with a California merchant must comply with California's law — the law follows the merchant's location, not the funder's.
  4. Brokers must also disclose their fees. In CA, VA, and GA, the broker commission must be disclosed in dollar terms; "8% commission" expressed as "$8,000 of your $100,000 advance goes to the broker" makes the cost stack visible.

The honest framing. Disclosure laws have meaningfully improved merchant decision-making in covered states. Industry data shows MCA fundings in California declined 12% in the year following SB 1235 expansion — likely because merchants shopping APR-equivalent disclosures discovered cheaper alternatives (SBA loans, bank lines). Funders adapted by emphasizing speed-to-fund and approval probability rather than competing on price alone. For merchants, the practical takeaway is: if you are in a covered state, demand the disclosure statement, read it before signing, and use the APR-equivalent number to compare offers. Funders who refuse or delay disclosure are likely non-compliant — choose a different funder.

Related terms

  • MCA pricing disclosure law — State laws (CA SB 1235, NY S5470, VA HB 1027, UT SB 183, GA SB 90, FL effective 2026-06-28) requiring MCA funders to disclose APR-equivalent, total cost, payment amount, term, and prepayment policy in TILA-style standardized format before contract signing.
  • MCA broker disclosure 2026 — The 2026 regulatory shift requiring MCA brokers (ISOs) to disclose commission amounts, fee structures, and funder-relationship conflicts of interest in writing before a merchant signs. Active in CA, NY, UT, VA, GA, FL (effective Jan 2026), and CT/NJ (effective July 2026); FTC rule pending federal action.
  • APR-equivalent — The annualized percentage rate implied by a factor-rate MCA. A 1.30 factor over 9 months is roughly 50–65% APR-equivalent depending on payment schedule.
  • MCA broker disclosures 2026 — New 2026 broker disclosure rules in CA, NY, VA, UT, GA, and FL (effective 2026-06-28) require MCA brokers to disclose commission amount, funding cost, total payment, prepayment terms, and broker-vs-funder identity before contract signing.

Authoritative sources

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