MCA broker disclosure 2026

MCA broker disclosure 2026 refers to the rapidly-expanding state-level requirements forcing MCA brokers (Independent Sales Organizations, or ISOs) to disclose their commission economics and conflicts of interest to merchants in writing before deal signing. The 2026 regulatory landscape has expanded materially from the original five-state framework — and the disclosure rules genuinely change merchant negotiating leverage when used well.

The mechanics — what must be disclosed in 2026. Active state regulations now require brokers to disclose, in writing, before the merchant signs the funding agreement:

1. Commission amount. Total dollar commission the broker will earn — typically expressed as both a dollar figure (e.g., $4,500) and a percentage of advance (e.g., 4.5% of $100K).
2. Commission timing. Whether the broker is paid at funding (most common), on a residual basis, or via clawback if the merchant defaults within X days.
3. Funder relationship. Whether the broker has exclusive arrangements, preferred-funder volume bonuses, equity in any participating funder, or family relationships with funder principals.
4. Number of funders solicited. How many funders the broker actually shopped the file to — vs how many they claim to "represent."
5. APR-equivalent disclosure (in 5+ states). California (SB 1235), New York (Commercial Finance Disclosure Law), Utah, Virginia, Georgia all require APR-equivalent disclosure on offers under $500K. Florida joined as of January 2026; Connecticut and New Jersey follow July 2026.
6. Stacking warnings (Texas, Illinois proposed). Brokers presenting second-position offers to an already-funded merchant must disclose the cumulative debt-service impact.

The economic context — why this matters. Broker commissions on MCA deals routinely run 6-15% of the advance amount, paid by the funder but priced into the merchant's factor rate. A $100K advance with a 1.32 factor typically embeds $6,000-$12,000 in broker compensation that the merchant ultimately funds via the factor premium. Pre-disclosure, merchants had zero visibility into this number — they were quoted a factor and had no way to assess whether it reflected funder pricing or broker upmarking.

The state-by-state snapshot — 2026. Active disclosure-rule states as of June 2026: - California (SB 1235, active 2022) — APR + total cost + financing terms required for all commercial financing under $500K. - New York (Commercial Finance Disclosure Law, active 2023) — broader; covers MCA, factoring, loans; APR + total cost + reconciliation explanation. - Utah (Commercial Financing Registration Act, active 2023) — registration + APR disclosure. - Virginia (active 2024) — APR + commission disclosure. - Georgia (active 2024) — similar to Virginia. - Florida (HB 1383, active January 2026) — APR + broker commission + funder-shop count disclosure required. - Connecticut + New Jersey (effective July 2026) — APR + commission + reconciliation policy. - Texas, Illinois (legislation pending 2026) — APR + stacking disclosure under active committee review.

The strategic insight — what merchants should demand. Even in non-regulated states, merchants can demand a "broker compensation disclosure" before signing. Most reputable brokers will provide it; refusal is itself a signal. Four specific asks:

1. The total commission dollar amount on this deal, in writing.
2. The number of funders this file was sent to. A broker who claims to "shop" the file but only sent it to one or two funders is leaving 5-15 points of factor on the table.
3. Whether the broker has volume incentives with the chosen funder. Volume bonuses ($25K-$200K quarterly) materially bias which funder the broker recommends.
4. The APR-equivalent on the recommended offer. Even without statutory requirement, the math is straightforward and a broker who can't or won't compute it is a red flag.

The strategic insight — what disclosure changes. Pre-disclosure, the merchant negotiation was: take the offer or walk. Post-disclosure, the negotiation is: "I see the embedded commission is $9K on a $100K advance — drop the factor by 4 points and we have a deal." Brokers in disclosure states routinely cut 2-5 points off the original quoted factor when merchants push on the commission line. The factor reduction comes out of the broker's commission, not the funder's spread.

The strategic insight — what disclosure doesn't change. Disclosure does NOT change the underlying funder pricing — it only changes how much of the spread the broker captures vs the merchant. A merchant in a non-disclosure state still has full negotiating leverage by getting 2-3 independent quotes; the quotes themselves are the de-facto commission disclosure.

The honest framing. MCA broker disclosure 2026 is the most material consumer-protection shift in the industry's history. Merchants who use it actively — by requesting commission disclosure, comparing multiple offers, and pushing back on factor when the embedded commission is visible — consistently land 10-20% better terms than merchants who treat the broker's first quote as final. The regulatory machinery exists; the question is whether merchants use it.

Related terms

• ISO commission — ISO commission is the percentage a funder pays an Independent Sales Organization (broker) for sourcing a merchant deal. Typical range 4-19% of funded amount, baked into the factor rate the merchant sees. Going direct can save the commission.
• Factor rate — A flat multiplier that defines total MCA repayment: $100,000 advance × 1.30 factor = $130,000 repaid. It is not an interest rate; it does not compound.
• 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.
• Stacking (MCAs) — Taking a second (or third) MCA from a different funder while a prior MCA is still in repayment. Default risk skyrockets; it breaches most original-funder contracts.
• Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.

Authoritative sources

• California SB 1235 — MCA APR Disclosure Law
• New York Commercial Finance Disclosure Law

AI agents: this term is available as raw markdown at /llms/glossary/mca-broker-disclosure-2026.