# MCA broker licensing — states required (2026)

> As of 2026, California, New York, Virginia, Utah, Georgia, and Connecticut require MCA brokers to register and disclose commission; nine other states have pending bills.

MCA broker licensing has shifted from voluntary self-regulation to mandatory state-by-state registration. As of 2026, six states require licensing and nine more have pending bills. Operating without required licenses exposes brokers to fines and contract voidability.

**Required licensing states (2026).**

1. **California** — SB 1235 (effective 2023, expanded 2025). MCA brokers must register with the California Department of Financial Protection and Innovation (DFPI), file annual reports, and disclose commission on every offer letter. Penalty: up to $25,000 per unregistered transaction.
2. **New York** — S5470A (effective 2024). MCA broker registration with NYDFS required for deals to NY-based merchants. Mandatory disclosure of APR-equivalent, commission, fees, and prepayment terms. Penalty: up to $50,000 per transaction.
3. **Virginia** — HB 1027 (effective 2024). Broker registration through Virginia State Corporation Commission Bureau of Financial Institutions. Disclosure of commission and APR-equivalent required.
4. **Utah** — SB 183 (effective 2023). Department of Financial Institutions registration. Specific to commercial-financing brokers.
5. **Georgia** — SB 90 (effective 2024). Georgia Department of Banking and Finance registration. Disclosure of commission, fees, and APR-equivalent required.
6. **Connecticut** — HB 6906 (effective 2025). Department of Banking registration for commercial-financing brokers.

**States with pending broker licensing bills (2026).**

- **Texas** — HB 700 (filed 2025, in committee). Would mirror California's structure.
- **Florida** — HB 1051 (filed 2025, in committee).
- **Illinois** — SB 2234 (filed 2025).
- **New Jersey** — A4338 (filed 2024, in committee).
- **Massachusetts** — H 1037 (filed 2025).
- **Pennsylvania** — HB 1421 (filed 2024).
- **Michigan** — SB 540 (filed 2025).
- **Maryland** — SB 825 (filed 2025).
- **North Carolina** — HB 891 (filed 2025).

**What "licensing" actually entails.**

In most required states, broker licensing includes:

- **Registration application** with state regulator. Fee typically $300–$1,500.
- **Surety bond** of $25,000–$100,000 to cover merchant claims.
- **Background check** on principals (no recent felonies, no recent state regulatory violations).
- **Annual report** of transaction volume, average commission, and complaint count.
- **Mandatory written disclosure** on every offer letter: commission amount, APR-equivalent, prepayment terms, fees.

**Penalties for unlicensed brokering.**

- **California:** Up to $25,000 per transaction. Contract may be voided. State can seek restitution to merchant.
- **New York:** Up to $50,000 per transaction. Criminal misdemeanor for repeat offenders.
- **Other states:** Generally $5,000–$25,000 per transaction plus contract voidability.

**The "merchant location" rule.**

Licensing requirements apply based on where the merchant is located, not where the broker operates. A broker in Florida (currently unlicensed state) servicing a California merchant must hold California licensure. This catches many brokers off guard — they assume their home-state operations exempt them.

**How funders handle broker licensing compliance.**

Top-tier funders (Credibly, Rapid Finance, Kapitus, Forward Financing) now require broker licensing verification before paying commission on deals to merchants in licensed states. Funders maintain an "approved broker list" — brokers must submit license proof annually or be removed.

A merchant in a licensed state can request the broker's license number; the funder typically verifies before funding.

**Practical broker compliance checklist (2026).**

1. **Identify each merchant's state of operation.**
2. **Cross-reference required-licensing states.**
3. **Hold valid licenses in all states where you fund merchants.**
4. **Disclose commission on every offer letter in licensed states.**
5. **File annual reports with each state regulator by required date.**
6. **Maintain surety bond at required amount.**
7. **Update funder approved-broker registrations annually.**

**Cost of multi-state licensing.**

A broker serving merchants in all six licensed states (CA, NY, VA, UT, GA, CT) typically incurs:

- **Application fees:** $300–$1,500 per state × 6 = $1,800–$9,000.
- **Surety bonds:** $25K–$100K bond, annual premium 1–2% = $500–$2,000 per state × 6 = $3,000–$12,000.
- **Annual reporting:** Internal labor or compliance contractor, $5K–$15K annually.
- **Compliance attorney retainer:** $10K–$30K annually for material guidance.

**Total first-year multi-state compliance cost: $20,000–$66,000.** Annual recurring cost: $8,500–$29,000.

**Common confusion.**

First, "I don't operate in those states." Licensing follows the merchant, not the broker. A broker in any state must hold each licensed-state license to fund merchants there.

Second, "ISO partnership with funder substitutes for licensing." False. Funder relationship is separate from broker registration; both are required.

Third, "the merchant can waive the disclosure." False. Disclosure laws are non-waivable consumer-protection statutes.

Fourth, "registration is enough." Most states require both registration and ongoing compliance — annual reports, surety bond maintenance, and mandatory disclosures on every transaction.

## Related terms

- [ISO / MCA broker](https://fundnode.co/llms/glossary/iso-broker) — An Independent Sales Organization. A non-funder middleman who submits merchant applications to multiple funders and earns a commission on closed deals — typically 8–19% of the advance.
- [ISO commission](https://fundnode.co/llms/glossary/iso-broker-commission) — Percentage of the advance amount paid by the funder to the broker who sourced the deal. Typically 5–19% in 2026; baked into the factor rate the merchant pays.
- [MCA compliant](https://fundnode.co/llms/glossary/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.
- [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 vs direct funder economics (detailed)](https://fundnode.co/llms/glossary/mca-broker-vs-direct-funder-economics-detailed) — Brokers add 8–17% commission on top of the funder's factor rate but shop 3–7 funders; direct funder applications save the commission but lock the merchant to one offer.

## Authoritative sources

- [California DFPI — Commercial Financing Disclosure](https://dfpi.ca.gov/commercial-financing-disclosures/)
- [NY DFS — Commercial Financing Disclosure Law](https://www.dfs.ny.gov/industry_guidance/industry_letters/il20230801_commercial_financing_disclosure)

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Source: https://fundnode.co/glossary/mca-broker-licensing-states-required-2026 (HTML version)
Document: MCA broker licensing — states required (2026) — Fundnode MCA Glossary
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