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New York’s Commercial Finance Disclosure Law: what lenders must show you
A newer New York rule requires certain commercial lenders to disclose financing terms in a standard format. Here is what it covers, and what it does not.
New York’s Commercial Finance Disclosure Law requires providers of certain commercial financing products, including merchant cash advances, to give borrowers a standardized disclosure before closing, similar in spirit to the disclosures required on a consumer mortgage. It is one of the more significant recent changes to how small business financing is regulated in New York, and it directly targets the exact problem this site covers most: factor rates that hide the true cost of an advance.
What the disclosure is supposed to include
In general terms, covered providers must disclose figures like the total cost of the financing, an estimated annual percentage rate, the term, and the payment amount and frequency, in a standard format designed to be comparable across offers. The goal is to let a business owner compare a merchant cash advance against a term loan on the same terms banks and consumer lenders already have to use.
What it does not do
The law requires disclosure, not a cap on cost. A lender can still charge a factor rate that annualizes to well over 100 percent APR and remain fully compliant, as long as that true cost is disclosed in the required format. It also does not apply to every commercial financing arrangement or every provider; the law has specific thresholds and exemptions, and which transactions are covered has been refined since the law’s original passage. If a specific deal is close to a threshold, that is a question for a lawyer, not a general guide like this one.
Why this still matters if you already have an advance
If you signed an advance before this disclosure was required, or from a provider who was not fully compliant, you may not have received a clear annualized cost figure at signing. That is exactly the gap our calculator is built to fill after the fact: put in your actual advance amount, factor rate, and term, and see the number a compliant disclosure should have shown you.
How this fits with confession of judgment reform
This disclosure requirement is separate from New York’s 2019 restriction on confessions of judgment against out-of-state debtors, covered in our dedicated guide, but the two changes point the same direction: New York has been steadily narrowing the gap between how merchant cash advances are marketed and what they actually cost and require. Neither law bans the product. Both make it harder for the true terms to stay hidden.
Nothing here is legal advice. If you are trying to determine whether a specific financing offer complies with New York’s disclosure requirements, that is a conversation for a commercial finance attorney, not a general explainer.
