New York Disclosure Laws: What Your Small Business Funding Offer Must Tell You
In short: New York law mandates that lenders and brokers provide a standardized disclosure box on your funding offer, including the APR, total repayment amount, and repayment term. This applies to merchant cash advances, term loans, lines of credit, and other commercial financing under 2.5 million dollars. These disclosures help you compare offers side-by-side, so always read them carefully. Apply for MCA Funding is a free service that matches you with vetted funding partners who comply with these rules.
Key takeaways
- New York's commercial financing disclosure law applies to offers under 2.5 million dollars, including merchant cash advances, term loans, and lines of credit.
- The disclosure box must show the APR, total repayment amount, and repayment term in a standardized format.
- For merchant cash advances, the APR and total cost must be expressed as a factor rate or annualized percentage.
- You have the right to see these numbers before you sign-if a provider does not provide them, walk away.
Why New York's Disclosure Laws Matter for Your Business
Running a small business in New York means juggling payroll, inventory, and growth-all while keeping an eye on cash flow. When you need funding, the last thing you want is a surprise cost buried in fine print. That is where New York's commercial financing disclosure law comes in. It forces lenders and brokers to lay out the true cost of your offer in a clear, standard format. This law, effective since 2024, covers most commercial financing under 2.5 million dollars, including merchant cash advances, term loans, equipment financing, and lines of credit.
The goal is simple: give you, the business owner, the same kind of transparency you get with consumer loans. No more guessing what factor rates or fees actually mean. By requiring a disclosure box with the APR, total repayment amount, and payment schedule, the law levels the playing field. That means you can compare offers side-by-side and pick the one that truly fits your business.
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What the Law Covers: Types of Funding Included
The disclosure law applies broadly to any commercial financing transaction where the total principal amount is 2.5 million dollars or less. This includes:
- Merchant cash advances (MCAs) - where you sell a percentage of future sales for a lump sum.
- Term loans - lump-sum loans repaid in fixed installments.
- Business lines of credit - flexible borrowing with a set limit.
- Equipment financing - loans for purchasing or leasing equipment.
- Invoice factoring and receivables financing - selling unpaid invoices for immediate cash.
The law also covers offers made by a broker or online marketplace. So whether you apply directly or through a service like Apply for MCA Funding, the disclosure must be presented. Some types of funding are excluded, such as leases of real estate, securities, or transactions of more than 2.5 million dollars. But for most small-business funding, you are covered.
What the Disclosure Box Must Include
The core of the law is a standardized disclosure box that must appear in your funding offer. Here is what it has to show:
Total Amount Financed
This is the actual dollar amount you will receive, minus any fees deducted upfront. For example, if you apply for a 50,000 dollar loan and the lender deducts a 2,000 dollar origination fee, the total amount financed is 48,000 dollars. The disclosure must show the number clearly.
Annual Percentage Rate (APR)
For most types of funding-like term loans or lines of credit-the APR must be calculated and displayed. This rate includes the interest rate plus any fees, expressed as an annualized percentage. For merchant cash advances, the APR is not always straightforward because they are not loans. But the law still requires a computation: the factor rate or multiplier must be shown, along with an annualized percentage rate for comparison. For example, a factor rate of 1.2 on a 10,000 dollar advance means you repay 12,000 dollars-so the APR equivalent might be higher depending on the repayment term. The disclosure box must include this number so you can compare it to other offers.
Total Repayment Amount
This is the grand total you will pay back, including all principal, interest, fees, and charges. If you borrow 20,000 dollars and the total repayment is 24,000 dollars, that 24,000 is your total repayment amount. It is a simple, scary number-but it is honest.
Repayment Term
The disclosure must state how long you have to repay the funding. For a term loan, this could be 12 months or 24 months. For an MCA, the term is usually expressed as an estimated number of weeks or months based on projected sales. The law says the provider must give a good-faith estimate of the term.
Payment Schedule and Amount
You will see a breakdown of how often you pay-daily, weekly, or monthly-and the specific dollar amount of each payment. For MCAs with daily ACH withdrawals, the disclosure will show the daily payment amount. This is critical for your cash flow planning.
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How the Costs Work: Illustrative Examples
To help you understand what these numbers mean, here are a few illustrative examples. Remember: these are not real rates; they are just examples to show how the disclosure works.
Example 1: Term Loan
You get a quote for a 30,000 dollar term loan with a 12-month term. The disclosure box shows:
Total Amount Financed: 30,000 dollars
APR: 18%
Total Repayment Amount: 33,600 dollars
Monthly Payment: 2,800 dollars
Repayment Term: 12 months
Now you can compare this to a loan with a 24% APR and see which is more affordable.
Example 2: Merchant Cash Advance
You receive an offer for a 20,000 dollar MCA with a factor rate of 1.25. The disclosure shows:
Total Amount Financed: 19,000 dollars (after a 1,000 dollar fee)
Factor Rate: 1.25
APR: 35% (based on estimated term)
Total Repayment Amount: 23,750 dollars
Estimated Repayment Term: 6 months
Daily Payment: 395 dollars (based on 180 days)
This tells you that you will pay 3,750 dollars above what you received-important for your decision.
Example 3: Business Line of Credit
A line of credit offer for 50,000 dollars might show:
Total Amount Financed: Up to 50,000 dollars (drawn amount)
APR: 15%
Total Repayment Amount: Varies based on draw
Repayment Term: 12 months
Minimum Payment: 1,000 dollars per month
With a line, the disclosure is based on a full draw, so you know the worst-case cost.
What to Look for and What to Avoid
When you get your disclosure box, take time to inspect it closely. Here are practical tips:
- Check the APR even if the product is a merchant cash advance. While the APR for an MCA can look high compared to a traditional loan, it is the only fair way to compare offers. A 40% APR MCA might be more expensive than a 20% APR term loan, but the MCA might be easier to qualify for. Do not just look at the factor rate-look at the APR.
- Read the total repayment amount. This is the real cost. If a 10,000 dollar loan costs 13,000 dollars to repay, ask yourself: can your business afford that?.
- Understand the repayment term. Short terms mean higher daily or weekly payments. For a bakery with seasonal slumps, a 6-month term might be too aggressive. For a contractor with steady contracts, it might work fine.
- Watch for hidden fees. The disclosure must include origination fees, underwriting fees, and any other charge that affects the total repayment. If you see a fee listed separately, ask what it covers. Some lenders may try to bundle fees into the total amount financed, but the law requires them to be transparent.
- Ask questions before signing. If the APR is missing or the total repayment amount seems unclear, do not accept. You have the right to a clear offer. Use a service like Apply for MCA Funding to get matched with providers who follow the law.
Mistakes to Avoid with Your Disclosure
Even with clear disclosures, business owners sometimes make errors. Here are common pitfalls:
- Ignoring the APR for MCAs. Some owners focus only on the factor rate because it is simpler. But the APR tells you the true cost when the term is short. A 1.3 factor rate over 3 months can mean a 60% APR-very expensive. Compare APRs, not just factor rates.
- Not comparing multiple offers. The disclosure law makes side-by-side comparison easy. Get at least three offers and lay the disclosure boxes next to each other. Look at the total repayment amount and APR. The cheapest offer might not be the one with the lowest factor rate.
- Signing without checking the payment amount. A small difference in daily payment can add up. For example, a 50-dollar daily payment difference over 6 months is 9,000 dollars. Make sure your cash flow can handle the payment schedule.
- Assuming all disclosures are the same. While the format is standard, different providers might compute the APR for an MCA differently. Ask the provider to show you how they got the APR number. If they cannot explain it, that is a red flag.
- Relying on verbal promises. The disclosure box is the final word. If a broker says the cost is X but the disclosure shows Y, go by the written disclosure. It is a legal document.
How Apply for MCA Funding Helps You Navigate These Laws
At Apply for MCA Funding, we are a free matching service that connects you with vetted funding partners. We do not lend money ourselves. But we know these disclosure laws inside and out. When you fill out a quick application with us, we match you with partners who are committed to transparency. They will present you with a clear disclosure box showing all the required information: total amount, APR, repayment term, and payment schedule. This makes it easy for you to compare offers from multiple partners and choose the one that works for your business.
We also help you understand what those numbers mean. If you have questions about the factor rate or the APR, we can point you to resources. And because we are free, you can explore your options without any pressure.
Practical Tips for Using Your Disclosure Box Wisely
- Get your offer in writing. Always request a formal disclosure before you sign anything. A reputable lender will provide it without hesitation.
- Work with a trusted partner. If you use a broker or matching service like Apply for MCA Funding, ensure they are vetted and follow the law. We only work with partners who comply with disclosure requirements.
- Know your cash flow. Before you accept any offer, calculate whether your business can handle the payments. Use the payment schedule from the disclosure to see how it fits with your average daily revenue.
- Ask about early repayment. Some loans or MCAs have prepayment penalties. The disclosure might mention this. If it does not, ask. Paying off early could save you money, but only if there is no penalty.
- Keep a copy. Save the disclosure box in your records. If there is a dispute later, you have the numbers to back you up.
Final Thoughts: You Are In Control
New York's disclosure laws are a big win for small-business owners. They turn confusing offers into transparent numbers you can understand. By reading the disclosure box carefully, you can avoid expensive surprises and choose funding that supports your business goals. Remember: you are not obligated to accept any offer. Always ask questions, compare options, and only sign when you are comfortable.
If you are ready to explore funding, start with Apply for MCA Funding-a free way to get matched with vetted partners who play by the rules. Your next offer will come with a clear disclosure box, and you will know exactly what you are getting into.