# MCA borrower rights under disclosure laws

> California, New York, Utah, Virginia, and Georgia 2026 disclosure laws require funders to provide APR-equivalent, total dollar cost, prepayment terms, and finance charges in writing before signing on advances under $500K.

MCA borrower rights under disclosure laws are the legally enforceable rights small business owners have to receive standardized pricing disclosures before signing a merchant cash advance contract. Five US states have enacted these laws as of 2026, fundamentally changing how MCAs are sold to merchants in those jurisdictions.

**The five-state landscape in 2026.** Each law has slightly different triggers and content, but the core rights are similar:

1. **California (SB 1235, effective 2023, expanded 2025).** Applies to all commercial financing under $500,000 in California. Funder must disclose: total amount of financing, total dollar cost, APR-equivalent, monthly payment estimate, and prepayment policies.
2. **New York (S5470-B, effective 2024).** Similar to California, $500K threshold, plus avoiding-cost-of-financing disclosure if prepayment penalty applies.
3. **Utah (HB 425, effective 2023).** $1M threshold, simpler disclosure — total cost, APR-equivalent, payment schedule.
4. **Virginia (HB 1027, effective 2024).** $500K threshold, includes broker fee disclosure if commercial financing broker is involved.
5. **Georgia (HB 1090, effective 2025).** $500K threshold, mirrors California closely but adds explicit broker compensation disclosure.

**The merchant's rights — what must be disclosed before signing.** Across all five states, six core elements:

1. **Total amount of financing.** The lump-sum advance the merchant will receive (net of any origination fees).
2. **Total dollar cost.** The full amount the merchant will repay over the term (advance × factor).
3. **APR-equivalent.** The annual percentage rate calculated using a standardized formula (varies slightly by state — CA uses a specific actuarial method).
4. **Payment schedule.** Estimated periodic payment amount, frequency (daily, weekly), and total number of payments.
5. **Prepayment terms.** Whether the merchant can prepay, any prepayment discount or penalty, and how prepayment is calculated.
6. **Broker fees.** If a third-party broker is involved, the dollar amount of the broker's commission (CA, VA, GA).

**The merchant's remedies — what happens if disclosure is violated.** Three remedies are typically available:

1. **Right to rescind.** In some states (CA, NY), undisclosed material terms give the merchant a right to rescind the contract within a defined window (often 5 business days post-funding).
2. **Civil penalties.** State attorneys general can impose penalties (CA: up to $2,500 per violation; NY: up to $10,000 per violation) and require disgorgement of profits on non-compliant deals.
3. **Private right of action.** Some state laws (NY, VA) allow merchants to sue directly for damages and attorney's fees if disclosure violations cause financial harm.

**The mechanics — what compliant disclosure looks like.** Most 2026 MCA contracts in covered states include a standalone "Disclosure Statement" page presented to the merchant before signing. This statement typically uses a standardized format (often a table) showing the six required elements side-by-side with the contract terms. Merchant must sign or initial the disclosure separately from the contract.

**The strategic insight — what merchants should know.** Four points:

1. **Disclosure is your shopping tool.** APR-equivalent disclosure makes MCAs comparable to bank loans for the first time — use it to compare funder offers on an apples-to-apples basis.
2. **The disclosure must come BEFORE you sign.** If a funder provides disclosure only after signing, that is a violation; document the timing.
3. **Out-of-state funders are still covered.** A New York funder doing business with a California merchant must comply with California's law — the law follows the merchant's location, not the funder's.
4. **Brokers must also disclose their fees.** In CA, VA, and GA, the broker commission must be disclosed in dollar terms; "8% commission" expressed as "$8,000 of your $100,000 advance goes to the broker" makes the cost stack visible.

**The honest framing.** Disclosure laws have meaningfully improved merchant decision-making in covered states. Industry data shows MCA fundings in California declined 12% in the year following SB 1235 expansion — likely because merchants shopping APR-equivalent disclosures discovered cheaper alternatives (SBA loans, bank lines). Funders adapted by emphasizing speed-to-fund and approval probability rather than competing on price alone. For merchants, the practical takeaway is: if you are in a covered state, demand the disclosure statement, read it before signing, and use the APR-equivalent number to compare offers. Funders who refuse or delay disclosure are likely non-compliant — choose a different funder.

## Related terms

- [MCA pricing disclosure law](https://fundnode.co/llms/glossary/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.
- [MCA broker disclosure 2026](https://fundnode.co/llms/glossary/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.
- [APR-equivalent](https://fundnode.co/llms/glossary/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 broker disclosures 2026](https://fundnode.co/llms/glossary/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.

## Authoritative sources

- [California SB 1235 — Commercial Financing Disclosure](https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB1235)
- [New York S5470-B — Commercial Financing Disclosure Law](https://www.nysenate.gov/legislation/bills/2019/s5470)

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Document: MCA borrower rights under disclosure laws — Fundnode MCA Glossary
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