New York Commercial Financing Disclosure Rules: What Small Business Owners Need to Know

What Is the New York Commercial Financing Disclosure Law?

New York has a commercial financing disclosure law. It requires many providers of business financing to give you a standardized written disclosure before you accept an offer, so you can compare the real cost of different options rather than a headline factor rate or interest rate.

The disclosure covers the amount of funding provided, the total repayment amount, the total dollar cost, how and how often payments are taken, and whether paying early changes the cost. New York disclosures also include an estimated annual percentage rate (APR). For a merchant cash advance, that APR is an estimate built on an assumed repayment pace, so read it as a comparison tool rather than a loan rate.

This is a transparency law. It puts the key numbers in one place, in a consistent format, before you commit. It does not make any offer cheaper, and it is not a promise of approval. Some transactions are exempt and details can change, so confirm what applies to your deal with the New York Attorney General's office, the state's financial regulator or a business attorney.

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Which Funding Types Are Covered?

The law applies to many commercial financing products, including many merchant cash advances. Whether a specific offer comes with a disclosure depends on the product and the transaction, so ask the funder directly. Here is what to look for in the products New York owners see most often.

Merchant Cash Advances (MCAs)

With an MCA, a funder buys a portion of your future card sales or receivables. MCAs are usually structured as a purchase of future receivables rather than a loan, which is why they are priced with a factor rate instead of an interest rate. Whether a specific agreement is treated as a loan depends on its terms, and courts have reached different conclusions, so an attorney should review anything unclear. On any MCA offer, look for the amount you will receive, the total amount to be collected, the estimated APR, how payments are collected (a fixed daily debit or a percentage of sales) and whether paying early lowers the total.

Business Loans and Term Loans

Term loans with a fixed repayment schedule are the most familiar product. Look at the principal, the interest rate, all fees, the total of all payments and the APR. If the rate is variable, ask how it is set and how high your payment could go.

Lines of Credit

For a business line of credit, look at the credit limit, the rate charged on what you draw, any draw or maintenance fees and how each draw must be repaid. Ask the provider to show, in dollars, what a typical draw would cost and how quickly it must be paid back.

Invoice Factoring and Receivables Financing

When you sell invoices at a discount, look at the advance rate, the discount fee, how the fee grows the longer your customer takes to pay and whether you have to buy back invoices your customers do not pay. An estimated annualized cost helps you compare factoring with other options.

What If Your Deal Is Not Covered?

Some transactions are exempt, and the exemptions are specific. If a funder tells you your deal falls outside the law, ask for the reason in writing. Then ask for the same core numbers anyway. There is no good reason for a funder to keep the total cost of an offer from you, whatever rules apply.

Key Terms You Must Understand (With Illustrative Examples)

Total Amount of Funds Provided

This is what you actually receive. If you are approved for a $10,000 advance and the funder deducts a $500 origination fee up front, the amount provided is $9,500. Watch for the gap between the approval amount and the funded amount, because your cost should be measured against what lands in your account.

Total Repayment Amount

This is the sum of all payments you will make. If you receive $10,000 and pay back $12,000 over six months, the total repayment is $12,000.

Estimated Annual Percentage Rate (APR)

For an MCA, the APR has to be estimated, because how fast you repay depends on your sales. Here is how much timing matters, using illustrative numbers: a $10,000 advance repaid as $12,000 through fixed daily debits over about six months works out to an estimated APR of roughly 75 percent. If the same $12,000 were collected over twelve months, the estimate would fall to roughly 38 percent. The dollar cost is identical; the annualized cost doubles when the money is collected twice as fast.

Payment Schedule and Amount

The schedule shows how often payments are due (daily, weekly or monthly) and how each one is calculated. With a fixed daily debit, you will see a specific dollar amount per business day: a $12,000 payback over roughly 126 business days is about $95 a day. With a percentage-of-sales MCA, you will see the holdback percentage and how it adjusts as sales change.

Total Cost of Capital

This is the total repayment minus the amount provided. In the simple example above with no upfront fee, $12,000 minus $10,000 is $2,000. If a $500 fee had been deducted, you would receive $9,500 and the dollar cost would be $2,500. It is the most straightforward number on the page and the easiest one to compare across offers.

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How to Read a Disclosure Statement

A disclosure is a short, standardized document. Alongside the funder's name and the type of financing, expect to find:

• Amount provided: the amount you will receive.
• Total repayment amount: the full amount that will be collected from you.
• Total dollar cost: the gap between those first two lines.
• Estimated APR: the annualized estimate.
• Payment method and frequency: how and how often payments are taken, and the amount or formula.
• Prepayment: whether paying early changes what you owe.

Ask separately about origination, underwriting, documentation and late fees if they are not broken out, and compare every line across offers. Here is a comparison that trips people up: a 1.2 factor rate on $10,000 means $12,000 total whether it is collected daily over six months or weekly over twelve. Both cost $2,000 in dollars, but the six-month version has a much higher estimated APR because you keep the money for half as long. Which one suits you depends on your cash flow and how long you need the funds.

How This Law Helps Your Business

Without a standard disclosure, some funders would quote only a factor rate and a holdback percentage and leave you to work out the rest. Picture a $10,000 advance with a 1.3 factor rate and a 10 percent daily holdback. If strong sales mean it is repaid in about four months, the estimated APR is well over 100 percent, even though 1.3 sounds modest. A disclosure puts an estimated APR in front of you before you sign, so you can compare it with a bank loan, a line of credit or another advance.

Save and print every disclosure you receive, and keep it with the contract. That record matters if a deal turns out not to match what you were told: put your questions to the funder in writing, keep every message, and report deceptive practices to the New York Attorney General's office or the FTC. A business attorney can explain your options.

Steps to Take When Comparing Offers

1. Get Multiple Disclosures

Ask every funder for its disclosure before you sign anything. If a funder hesitates, treat that as a red flag. A free matching service can help you collect several offers at once instead of calling funders one by one.

2. Compare Total Cost of Capital

Start with the dollar cost: total repayment minus the amount provided. Then look at the estimated APR to see how timing changes the picture. A lower dollar cost is better, but weigh it against payment frequency and term.

3. Check the Payment Schedule

Can your business handle daily debits in a slow week? Would weekly or monthly payments fit better? The disclosure shows how and how often payments are taken, so hold that up against your actual deposit pattern.

4. Understand Prepayment Options

Some funders reduce the total if you pay early; with many MCAs the total stays fixed. The disclosure tells you whether paying early changes the cost. If you expect to repay quickly, favor an offer that rewards it.

5. Read the Fine Print

The disclosure is a summary. The contract may add default terms, a personal guarantee, a UCC lien on business assets or a confession of judgment, which can let a funder get a judgment quickly if you default. Several states restrict confessions of judgment. Ask for the full agreement and review it with your accountant or attorney before you sign.

Common Mistakes to Avoid

• Focusing only on the factor rate. A 1.2 factor rate sounds low, but the annualized cost can be high if the term is short. Look at the estimated APR.
• Ignoring payment frequency. Daily debits can drain an account quickly. Make sure your daily revenue can cover them in a slow week, not just a good one.
• Assuming the disclosure is the contract. The disclosure comes before the contract. Check that the numbers in the contract match it.
• Not shopping around. A standardized format is built for comparison, so compare at least two or three offers.
• Forgetting about personal guarantees. Many funding agreements include one, which puts your personal assets at risk. Ask directly whether yours does.

How Find Merchant Funding Can Help You Compare Offers

Find Merchant Funding is a free service that connects small business owners with vetted third-party funding partners. We are not a lender, we do not make credit decisions and we never guarantee approval or specific terms; every funder makes its own decision based on your revenue, time in business and other factors. When you submit a request, you may receive offers from more than one funder, each with its own disclosure, and you can compare them side by side.

If you are a New York business owner looking for working capital, equipment financing or a merchant cash advance, start by getting the numbers in writing. The disclosure gives you a clear view of the cost before you commit, and the decision stays yours.