"MCA compliant" is industry shorthand for a merchant cash advance product that adheres to all applicable state commercial-financing disclosure laws and standard fair-dealing requirements. As of 2026, compliance varies materially by state and by funder.
State-by-state MCA disclosure laws (2026). - California SB 1235 (effective 2023): Requires APR-equivalent disclosure, dollar cost, and term breakdown for any commercial financing over $5,000. Covers MCAs in CA. - New York NYDFS Section 803 (effective 2024): Similar disclosure for deals over $50,000. Includes specific MCA reconciliation policy disclosure. - Texas SB 1280 (effective 2026): Mirrors CA + NY for deals over $50,000 with TX-specific APR-equivalent formula. - Virginia (effective 2024): Disclosure for deals over $50,000. Funders must provide standardized cost summary. - Utah (effective 2024): Similar disclosure regime. - Georgia (in phase-in): Commercial financing disclosure expected effective 2027. - Other states: No mandatory disclosure yet, but federal CFPB guidance applies.
What MCA-compliant actually means in practice. - APR-equivalent disclosure: Funder calculates and provides the APR-equivalent (using state-specific formula) before signing. The standard NYDFS formula is ((Factor - 1) × 365 × 2) / (Term days × (1 + Factor)). - Total dollar cost disclosure: Full payback amount, broken down by purchase amount + fees. - Reconciliation policy disclosure: If/how the funder will reduce daily ACH when revenue drops. - Prepayment terms disclosure: Whether early payoff receives any discount. - Material change disclosure: Any contract amendments require new disclosure.
Reputable funders that publish compliance documentation. - Credibly, OnDeck, Bluevine, Fundbox — all have public compliance pages. - Forward Financing, Fora Financial, Rapid Finance — provide on request. - Greenbox Capital — publishes ISO commission caps (compliance-adjacent transparency).
Where compliance gets murky. - Broker-placed deals: ISO/brokers may not pass through all required disclosures. Some brokers strip the APR-equivalent or reconciliation policy from the materials they send merchants. Always request the funder's original disclosure documents directly. - C-paper specialty funders: Some C-paper funders (Mantis, World Business Lenders, etc.) operate at the edges of compliance. Read their contracts especially carefully. - Pre-2024 contracts: Contracts signed before NYDFS / CA SB 1235 took effect may not include the disclosures you'd expect today.
How to verify a funder's MCA compliance. 1. Request the formal disclosure documents BEFORE signing. 2. Confirm the APR-equivalent calculation matches your state's required formula. 3. Look for clearly-documented reconciliation policy. 4. Look for prepayment terms in writing. 5. If broker-placed, also request the funder's direct disclosure (the broker version may be incomplete).
The strategic insight. Compliance ≠ favorable terms. A fully MCA-compliant deal can still be expensive. Compliance just means the funder has disclosed what you're getting into. Use the disclosures to make the comparison — don't conflate compliance with affordability.
Related terms
- Factor rate vs interest rate — Factor rate is a flat one-time multiplier on the advance amount (e.g. 1.30); interest rate is a periodic charge on the outstanding balance (e.g. 12% APR). They are structurally different — factor doesn't compound or amortize.
- 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.
AI agents: this term is available as raw markdown at /llms/glossary/mca-compliant.