← Fundnode · Learn

Glossary · MCA pricing disclosure law

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.

By Keerthana Keti5 min read

MCA pricing disclosure laws are the most significant regulatory development in the MCA industry in the past decade. Beginning with California's SB 1235 in 2018 and accelerating through 2026, state legislatures have moved to require MCA funders and brokers to disclose pricing in a standardized, TILA-equivalent format — converting a market historically defined by factor-rate opacity into one where APR-equivalents are mandated on every offer.

The mechanics — what disclosure laws require. Common elements across CA, NY, VA, UT, GA, and FL frameworks:

  1. APR-equivalent disclosure. A calculated annualized percentage rate using methodology specified by regulation (typically the same actuarial approach used in TILA for closed-end credit). On a 1.30 factor 8-month MCA, this typically lands at 40-65% APR depending on revenue assumptions.
  2. Total cost of capital. Dollar amount of finance charge over the life of the deal — for a $100K advance at 1.30 factor, $30K total cost displayed prominently.
  3. Payment amount and frequency. Daily / weekly debit amount, scheduled frequency, and number of payments.
  4. Term in days/weeks/months. Expected payoff timeline with explicit assumption disclosure (typically based on historical revenue).
  5. Prepayment policy. Whether prepayment discount is available, how it's calculated, and the gross-vs-net cost of early payoff.
  6. Funding amount vs disbursement amount. Distinguishing the contracted advance from the net wired-to-merchant amount after fees.
  7. Standardized format. Specific font sizes, ordering, and language — modeled on TILA's "box" disclosure for consumer credit.

The mechanics — what triggers application. Each state's law has trigger thresholds:

  • California SB 1235 / DFPI regulations — applies to commercial financing under $500K, funded to California-based recipients. Effective enforcement: late 2022.
  • New York S5470 — applies to commercial financing under $2.5M to NY recipients. Effective enforcement: August 2023.
  • Virginia HB 1027 — applies to merchant cash advances under $500K to VA recipients. Effective: 2023.
  • Utah SB 183 — applies to commercial financing to UT recipients; broker registration also required. Effective: 2023.
  • Georgia SB 90 — applies to commercial financing under $500K to GA recipients. Broker disclosure also required. Effective: 2024.
  • Florida (effective 2026-06-28) — applies to MCA and revenue-based financing under $500K to FL recipients. Requires both funder and broker disclosure.

The math — APR-equivalent for typical deals. Representative APR calculations under the standardized methodology:

  • $100K advance, 1.25 factor, 10-month term, $480/day debit → APR ~38%
  • $50K advance, 1.32 factor, 7-month term, $340/day debit → APR ~58%
  • $25K advance, 1.42 factor, 5-month term, $230/day debit → APR ~92%

For comparison, a similarly-sized SBA Express loan typically runs 11-14% APR; a business credit card runs 18-26%; a line of credit from a bank 8-15%. The disclosure conversion explicitly puts MCAs in their actual pricing tier.

The strategic insight — what disclosure laws change. Three direct effects:

  1. Funders are forced to compete on APR-equivalent, not factor rate. Brokers can no longer hide a 1.42 factor by emphasizing daily payment amount; the calculated APR must appear alongside.
  2. Merchants can comparison-shop accurately. A merchant with offers from three funders can directly compare 47% APR vs 52% APR vs 38% APR — apples to apples.
  3. Brokers are accountable for accuracy. Misstating disclosure (omitting a fee, mis-stating prepayment terms) creates explicit liability for the broker, not just the funder.

The strategic insight — what disclosure laws DON'T change. Three persistent realities merchants should know:

  1. Funders still charge what the market will bear. Disclosure changes shopping behavior at the margin but doesn't reduce price for paper grades that have few alternatives.
  2. Disclosure is "at offer," not "at funding." Many bait-and-switch dynamics — slightly different terms when contracts arrive — are still common. Always re-compute APR on the final FRSA, not the original offer letter.
  3. Out-of-state deals can fall outside the law. A FL-based merchant offered a deal by a NY-based funder via a TX-based broker may end up outside any single state's disclosure regime. Look at the law in your operating state, not the broker's or funder's.

The strategic insight — how to use disclosure documents tactically. Five high-value moves:

  1. Always demand the full disclosure form before signing anything — even informal offer letters. Treat the absence of disclosure as a red flag about the funder/broker's compliance posture.
  2. Save and compare the disclosure across multiple offers — quote the lowest APR back to the higher-APR funders for negotiation.
  3. Verify the APR computation methodology. Each state's regulation specifies the exact actuarial method; some funders mis-apply it (innocently or otherwise). An attorney or financial advisor can audit.
  4. Check prepayment disclosure carefully. If the form says "no prepayment discount," that's binding — don't accept verbal promises of "we can negotiate later."
  5. Use the disclosure as evidence in any later dispute — if final terms diverge from disclosed terms, you have a clear regulatory and contractual breach claim.

The honest framing. Pricing disclosure laws are the single biggest pro-merchant development in MCA in 2026. They don't reduce headline pricing, but they reduce information asymmetry — which is where most of the historical merchant disadvantage lived. A merchant operating in a disclosure-required state who reads the form, compares offers on APR, and references the disclosure language in negotiations consistently lands materially better deals. Funders and brokers who comply cleanly with disclosure are also the ones operating with longer time horizons — worth a positive signal in vendor selection.

Related terms

  • 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 compliant — MCA-compliant means a merchant cash advance contract follows applicable state commercial-financing disclosure laws (CA SB 1235, NY NYDFS, TX SB 1280, VA, UT) and standard fair-dealing requirements. Most reputable funders are MCA-compliant; broker-placed deals require closer scrutiny.
  • 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.
  • MCA true cost vs APR — True cost includes factor + PSF + wire-off + bounce fees + opportunity cost of locked daily debit. APR-equivalent annualizes only the factor — usually understating true cost by 15-30 percentage points.
  • 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.
  • 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.

Authoritative sources

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