← Fundnode · Learn

Glossary · MCA broker licensing thresholds 2026

MCA broker licensing thresholds 2026

As of 2026-06-29, 9 states require ISO/broker registration for MCA brokers. Thresholds range from any brokerage activity (CA, NY, NJ) to $1M aggregate annual originations (some states). Penalties for unlicensed brokerage: $2K-$50K per transaction.

By Keerthana Keti5 min read

MCA broker licensing thresholds 2026 overview covers state-by-state registration and licensing requirements for independent sales organizations (ISOs) and brokers who refer merchants to MCA funders. Broker licensing is distinct from funder licensing and is regulated separately in most states.

States requiring MCA broker registration (2026).

  1. California. Broker registration required under CFL. Threshold: any brokerage activity. Fee: $300 + annual.
  1. New York. Broker registration required under CFDL. Threshold: any brokerage activity. Fee: $300-$500 + annual.
  1. New Jersey. Broker registration required under S 819. Threshold: any brokerage activity. Fee: $200-$500 + annual.
  1. Virginia. Broker registration required for commercial financing brokers. Threshold: any brokerage activity.
  1. Connecticut. Broker registration required under SB 1029 (2026 new). Threshold: any brokerage activity.
  1. Georgia. Broker registration required under SB 90.
  1. Utah. Broker registration required for commercial financing brokers.
  1. Florida. Broker registration required for consumer finance brokers; MCA classification disputed.
  1. Illinois. Broker registration required in some structures.

Penalties for unlicensed brokerage.

  • California: $2,500-$25,000 per transaction; merchant can void contract.
  • New York: $1,000-$10,000 per violation.
  • New Jersey: $1,000-$10,000 per violation.
  • Other states: $500-$5,000 per violation.

Broker registration requirements (typical).

  • Application fee ($200-$1,000).
  • Surety bond ($5K-$50K depending on state).
  • Background checks for principals.
  • Annual renewal.
  • Customer disclosure documents.
  • Compliance program.

Broker disclosure obligations.

Some states require brokers to disclose:

  • Commission/spread earned from funder.
  • Relationship to funder (exclusive vs non-exclusive).
  • Number of funders represented.
  • Conflict of interest disclosures.

California SB 1235 requires broker fee disclosure as part of standardized disclosure form.

NJ S 819 requires broker commission disclosure.

ISO networks vs independent brokers.

ISO structures vary:

  • Captive ISO. Single funder exclusive relationship; broker only places with one funder.
  • Open ISO. Non-exclusive; broker can place with multiple funders.
  • Hybrid. Tiered relationship with primary funder + secondary.

Licensing applies equally to all ISO structures.

Broker fees and spreads.

Broker compensation structures:

  • Commission. 8-15% of funded amount, paid by funder.
  • Spread. Difference between funder's quoted factor and merchant's actual factor; broker captures spread.
  • Combined. Commission + spread (most common in 2024-2026).

Disclosure obligations vary:

  • CA: spread must be disclosed.
  • NY: commission must be disclosed (spread disputed).
  • NJ: commission must be disclosed.
  • Other states: no disclosure required.

Common broker compliance failures.

  1. Operating without registration. Most common violation.
  2. Failure to disclose commission/spread. Material in disclosure states.
  3. Misrepresenting funder terms. Quoting different rates than funder provided.
  4. Stacking referrals. Referring same merchant to multiple funders for additional commission without disclosure.
  5. Document tampering. Altering applications or bank statements to qualify merchants.

FTC sweep on broker fee opacity.

The 2026 FTC sweep against six funders included broker-related claims:

  • Funders failed to require brokers to disclose commissions.
  • Brokers earned undisclosed spreads.
  • Total broker compensation reached 25-40% of advance amount in some cases.

Implications for brokers.

Brokers should:

  • Register in all states where they operate.
  • Maintain accurate disclosure documents.
  • Document all merchant communications.
  • Disclose commission and spread to merchants.
  • Avoid stacking and document tampering.

Implications for merchants.

Merchants should:

  • Ask broker for licensing information.
  • Ask broker about commission/spread structure.
  • Compare multiple broker offers.
  • Note that unlicensed broker contracts may be voidable.

Implications for funders.

Funders should:

  • Verify broker licensing before accepting referrals.
  • Require broker compliance with disclosure laws.
  • Audit broker channel quarterly.
  • Document broker oversight programs.

As of 2026-06-29, Fundnode operates as an unregistered referral platform (not a broker) and discloses its referral-fee structure transparently so merchants understand compensation flows before connecting with funders.

Related terms

  • MCA licensing thresholds by state 2026 — As of 2026-06-29, 14 states require some form of MCA funder licensing or registration. Thresholds range from any MCA activity (CA, NY) to $50M+ in originations (proposed federal). Penalties for unlicensed activity: $5K-$100K per transaction.
  • MCA broker fee cap by state 2026 — As of 2026-06-29, no US state caps MCA broker fees by hard percentage. Disclosure requirements (CA, NY, NJ, VA, UT, GA, CT) create market pressure. Typical broker commission: 8-15%; spread: 5-25% additional. Some states (NY) limit total broker compensation to 'reasonable' standard.
  • MCA disclosure law comparison by state 2026 — As of 2026-06-29, six states (CA, NY, UT, VA, GA, NJ) require pre-contract APR-equivalent disclosure for commercial financing including MCAs. Connecticut joined in 2026. Standardized format mandates APR, total cost, average monthly payment, prepayment terms.

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