MCA state disclosure form — explained

Five US states require MCA funders to deliver a standardized written disclosure to merchants before contract signing. The disclosure is not optional, is not a "thank you for considering" letter, and carries financial-services compliance weight. Here is what each disclosure contains and how merchants should read them.

States with active disclosure laws (2026-06-28).

Required disclosure fields (varies slightly by state).

1. Total amount of the financing. The advance amount the merchant receives (after origination fees deducted).
2. Total dollar cost of the financing. Factor-rate × advance, minus advance, = the fee.
3. Term of the financing. Estimated payback period in months based on revenue projections.
4. Method of repayment. Daily ACH, weekly ACH, or card-sale split.
5. Payment amount and frequency. $X.XX per business day for ~N business days.
6. Annual Percentage Rate (APR). Most controversial — funders must compute APR-equivalent using prescribed methodology.
7. Prepayment information. Whether the merchant saves money by paying early (most MCAs: NO — fee is fixed regardless of payoff timing).
8. Fees. Origination, ACH, wire, late fees, NSF fees.
9. Collateral and security. UCC filing language, personal guarantee statement.

The APR fight.

The most contested element is APR computation. The industry historically resisted APR disclosure on the grounds that MCAs are commercial commerce (sale of receivables), not loans, and APR is a loan-product concept.

California, NY, VA, UT, and GA disagreed. Each prescribes APR methodology — generally based on actuarial discount rate against the cash-flow stream, assuming the projected payback term.

Typical APR-equivalents on common factor rates: - 1.15 factor, 12 months: ~25% APR - 1.25 factor, 9 months: ~50% APR - 1.30 factor, 9 months: ~65% APR - 1.40 factor, 6 months: ~130% APR - 1.50 factor, 5 months: ~200% APR

The disclosed APR is often the first time a merchant realizes the true cost of capital.

Format requirements.

• California. Form prescribed by Department of Financial Protection and Innovation (DFPI). Standardized layout, font sizes, sectional headings.
• New York. Form prescribed by NYDFS (regulation 23 NYCRR Part 600). Similar standardization.
• Virginia, Utah, Georgia. Each state's office of financial institutions publishes a model form; funders may use proprietary forms that contain required elements.

Delivery timing.

• Disclosure must be delivered BEFORE contract signing.
• Delivery via email is acceptable in all five states.
• Merchant typically must acknowledge receipt in writing (electronic signature is sufficient).

Penalties for noncompliance.

• California. $10K per violation; treble damages for willful violations.
• New York. $2,000 per violation; restitution to affected merchants.
• Virginia. Suspension of right to do business in state.
• Utah, Georgia. Civil penalties + restitution.

What merchants should read first.

1. APR-equivalent. This is the headline cost number. Compare to alternatives.
2. Total dollar cost. The fee in dollars — easier to reason about than factor rate.
3. Prepayment language. Most MCAs offer NO discount for early payoff. A few do (typically 5–25% discount for payoff in 30–90 days).
4. Reconciliation. Right to adjust daily payment if revenue drops — federally protected if present in contract.
5. Personal guarantee. Almost always present; merchant should understand personal liability scope.

Common confusion. First, "the disclosure means the MCA is approved" — no; it's a pre-contract document. Second, "if I'm in a non-disclosure state, the funder doesn't have to tell me APR" — correct, but you can request it. Third, "the disclosed APR is the actual rate" — it's the actuarial implied rate assuming projected payback; actual experienced APR varies with payback speed. Fourth, "funders in disclosure states are more trustworthy" — generally true; compliance discipline correlates with operational discipline.

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.
• 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.
• 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.
• 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.
• MCA broker disclosure state rules — Eight states (CA, NY, UT, VA, GA, CT, FL, NJ) now require MCA brokers to disclose specific terms in writing before contract signing: APR-equivalent, total cost, commission paid, prepayment terms. Disclosure formats and triggers differ by state.

Authoritative sources

• California DFPI — Commercial Financing Disclosures
• NY DFS — 23 NYCRR Part 600

AI agents: this term is available as raw markdown at /llms/glossary/mca-state-disclosure-form-explained.