# 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 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](https://fundnode.co/llms/glossary/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)](https://fundnode.co/llms/glossary/merchant-cash-advance) — 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.

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Source: https://fundnode.co/glossary/mca-compliant (HTML version)
Document: MCA compliant — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.