MCA Disclosure Laws: What Funders Must Now Reveal
New state laws in CA, NY, VA, and UT now require MCA funders to disclose your true cost of capital. Here's what they must show you and how to use it.
The True Cost Your MCA Funder Didn't Have to Show You
You signed the MCA agreement. The funder deposited money. Daily debits started. But did you actually know what that advance was costing you — in real, annualized terms? For most business owners, the honest answer is no. Not because you weren’t paying attention, but because your funder wasn’t legally required to tell you.
Traditional lenders — banks, SBA-backed lenders, credit unions — operate under federal disclosure requirements that mandate clear presentation of APR, total finance charges, and payment schedules before you sign. MCA funders have long structured their products as purchases of future receivables rather than loans, which allowed them to sidestep those requirements entirely. You received a factor rate, a repayment amount, and a daily debit figure. What those numbers meant in annualized terms — compared to any other form of business credit — was something you had to figure out on your own.
That’s changing. California, New York, Virginia, and Utah have all enacted commercial financing disclosure laws that require MCA providers to give business owners standardized cost information before they sign. This article explains what these laws require, what your disclosure statement should contain, and how to use that information — whether you’re evaluating a new offer or already managing MCA debt and trying to understand how you got here.
Why MCA Funders Didn't Have to Disclose APR — Until Now
The federal Truth in Lending Act (TILA) has required lenders to disclose the annual percentage rate on credit transactions since 1968. The law was designed to let borrowers compare financing offers on a consistent basis — one set of numbers, calculated the same way across all lenders. TILA’s protections apply to consumer credit. They do not automatically extend to commercial financing provided to businesses.
MCA funders reinforced that gap with deliberate contract language. By framing the transaction as a merchant selling a portion of future receivables at a discount — rather than a borrower receiving a loan — providers historically avoided classification as lenders under both federal and state law. Courts in several jurisdictions have upheld that characterization in certain circumstances. No loan classification meant no APR requirement, and no APR requirement meant no standardized cost disclosure.
For business owners, the practical result was a transparency gap that made genuine comparison nearly impossible. A factor rate of 1.45 looks nothing like a conventional interest rate, and most owners had no frame of reference for translating one into the other. Many didn’t realize their effective annualized cost might exceed 100% — not because they were unsophisticated, but because no one was required to frame it that way. The CFPB’s ongoing small business lending research has consistently identified cost transparency as one of the most significant challenges small business owners face when evaluating alternative financing options.
California, New York, Virginia, and Utah Lead the Way
California’s Senate Bill 1235, administered by the California Department of Financial Protection and Innovation (DFPI), was the first significant state-level commercial financing disclosure law in the country. It took effect for most providers in December 2022 and applies to MCA companies offering financing to California-based businesses. The law requires standardized disclosure of the total amount financed, the total repayment amount, the total dollar cost of financing, the payment schedule, and — critically — an annualized rate expressed as a percentage.
New York followed with its own commercial financing disclosure rules, extending similar requirements to financing offers directed at New York businesses. Virginia enacted commercial financing disclosure requirements in 2022. Utah passed comparable legislation in 2023. These laws are not identical — California and New York have the most detailed requirements — but they share a common framework: business owners must receive standardized cost information before they sign, making genuine comparison possible for the first time in the MCA industry.
More states are closely watching. There is active legislative attention in Florida, Missouri, and Connecticut, and the direction is clearly toward greater transparency. If your business is in one of the four states where disclosure is already required, you have rights that didn’t exist two years ago. If you’re in a state that hasn’t yet enacted a disclosure law, that may change before your next MCA renewal — and knowing what the leading states require gives you a useful benchmark for what to ask your funder regardless.
The Key Numbers Your Disclosure Statement Must Include
Under the California and New York frameworks — the most detailed currently in effect — a compliant MCA disclosure statement must include several specific data points. First: the total amount of financing, meaning the actual cash the business receives after any origination fees or deducted costs. Second: the total repayment amount — every dollar the business is obligated to return under the contract. Third: the total dollar cost of financing, expressed as a concrete dollar figure rather than a percentage rate.
Fourth: the payment schedule, or for variable-payment products tied to a percentage of daily receivables, an estimated payment amount and frequency based on projected revenue. Fifth: a clear description of prepayment terms — whether the business can pay the balance early, and whether any reduction in the total amount owed applies if it does (many MCA contracts offer none). Sixth, and most importantly: an annualized rate expressed as a percentage. For fixed-repayment MCA products, this functions as an APR equivalent and gives business owners the tool they need to compare the offer against conventional financing for the first time.
If you’re in California, New York, Virginia, or Utah and received an MCA offer after the relevant effective date, you should have received this disclosure document before signing. If you can’t locate yours, contact your funder in writing and request a copy. Keep that correspondence — it documents the original terms and becomes useful context if you later pursue a hardship accommodation or negotiated resolution with the funder.
What the Disclosure Math Reveals About Your MCA Cost
Let’s run through a realistic example. A business takes a $75,000 MCA at a factor rate of 1.42. Total repayment: $106,500. Finance charge: $31,500. Daily debit: approximately $880 for about 120 business days — roughly six months of repayment. A compliant disclosure statement would present all of those figures clearly, along with an annualized rate that puts the $31,500 finance charge in the context of time.
For a six-month repayment term, the annualized rate on this example lands somewhere between 85% and 105%, depending on the calculation methodology. That number is not a violation of any law — it reflects the real market rate for unsecured, fast-access commercial funding with minimal underwriting requirements. Some businesses genuinely need that capital and find the cost justified in context. The problem is that many owners took advances at that cost without understanding what it meant, stacked additional advances on top when cash flow tightened, and now face combined daily debits that far exceed what the business can sustain.
The Federal Reserve’s Small Business Credit Survey consistently finds that among small business owners who used online and alternative lenders, the owners most satisfied with outcomes were those who fully understood the cost of financing before signing. For owners already in MCA debt, building that understanding retroactively is still valuable — because it’s the foundation you need for a productive restructuring conversation.
How to Use Disclosure Rights When You're Already in an MCA
For business owners evaluating a new MCA offer in a disclosure-law state, the law gives you a clear right: receive standardized cost information, including an annualized rate, before you sign. Use it. Compare that annualized rate against every other financing option available to your business. The number may still justify the advance for your situation — but it should be an informed decision, not a surprise you discover six months later.
For owners already managing MCA debt — especially stacked advances with multiple funders — disclosure information serves a different but equally useful purpose. Requesting disclosure statements from your funders puts documented, quantified cost data in front of you. That data is directly relevant when approaching funders about hardship accommodations, payment adjustments, or lump-sum settlement. Funders operating under disclosure laws have already done the full cost-of-capital math internally. You deserve to have access to the same numbers when discussing your options.
Keep in mind that disclosure laws apply to new offers, not retroactively to existing contracts signed before the effective dates. But there is nothing preventing you from requesting detailed cost information from your current funders in writing regardless of what state law technically requires. Larger institutional funders in particular have established processes for handling these requests. The right MCA Relief Specialist can help you compile this picture across all of your active funders and use it as the starting point for a structured negotiation strategy.
What to Do If You're Already Managing MCA Debt
If you’re reading this because you’re already under daily MCA debits — and you’re starting to realize you may not have understood the full cost when you signed — you’re not alone, and you’re not out of options. The disclosure laws described here are focused on new offers. But the restructuring and negotiated resolution options that exist for existing MCA debt are very real, and they’re available right now.
Structured payment plans, lump-sum settlements, and hardship accommodations are part of how funders manage their portfolios every day. In past cases, six-figure balances have been negotiated down significantly — an original balance of $84,000 resolved at $24,000, for example, or a five-funder stacking situation restructured into a manageable single payment. Results vary and are not guaranteed. Past performance does not predict future results. But the options exist, they don’t require taking another advance to fund them, and a qualified specialist can help you evaluate what’s realistic for your specific situation quickly.
This information addresses commercial business debt and is not consumer debt advice or legal advice for your specific situation. Creditors may not always agree to proposed terms — every funder and every contract is different. That said, you are significantly more likely to reach a workable outcome with an experienced MCA Relief Specialist navigating the conversation than attempting to negotiate alone. The first step is typically a no-cost consultation to map your full picture: how many funders, what the remaining balances are, what the daily drain is costing you, and what realistic paths forward look like from there. That conversation is worth having sooner rather than later.
Photo credits: Featured image by Vitaly Gariev on Unsplash; Section 1 by Vitaly Gariev on Unsplash; Section 2 by Joachim Schnürle on Unsplash; Section 3 by Steve Marquez on Unsplash; Section 4 by 2H Media on Unsplash; Section 5 by Cht Gsml on Unsplash; Section 6 by RDNE Stock project on Pexels; Section 7 by Vitaly Gariev on Unsplash.