New York Disclosure Laws: What Your Funding Offer Must Tell You

What Is New York's Commercial Financing Disclosure Law?

New York has a commercial financing disclosure law designed to bring transparency to business funding. It requires many providers of business financing, including many merchant cash advance companies, to give you a standardized written disclosure before you sign. The disclosure shows the amount of funding you will receive, the total you will repay, the total dollar cost, an estimated annual percentage rate, how and how often payments are taken, and whether paying early changes what you owe.

Think of the disclosure as a pre-contract summary rather than the agreement itself. It arrives before you commit so you can compare offers on the same terms, without digging through fine print to find the price. Some transactions are exempt and requirements can change, so confirm what currently 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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Why Does This Law Matter for Your Business?

Business funding has long been priced in ways that resist comparison. A merchant cash advance quotes a factor rate, a term loan quotes an interest rate, and a line of credit might add draw fees on top. Without a common measure, it is easy to pick the offer that looks cheapest rather than the one that actually is.

Consider an illustrative example. A $10,000 merchant cash advance with a factor rate of 1.3, repaid in daily payments over about six months, means repaying $13,000. Expressed as an annual rate, that works out to roughly 109%. A $10,000 term loan at a 25% annual rate over twelve months, by comparison, costs about $1,400 in interest, with total repayment near $11,400. The factor rate of 1.3 sounds modest next to 25%, yet the advance costs more than twice as much in dollars and far more on an annual basis. The annual percentage rate on each disclosure is what exposes that gap before you sign rather than after.

What Types of Funding Are Covered?

The law applies to many kinds of commercial financing, not just advances. Products New York business owners commonly see include:

• Merchant cash advances: a lump sum in exchange for a portion of future receivables.
• Invoice factoring: selling unpaid invoices at a discount.
• Business lines of credit: revolving credit with draw and repayment terms.
• Term loans: a lump sum repaid with interest over a fixed period.
• Equipment financing: loans or leases for equipment.
• Revenue-based financing: repayment tied to a share of your sales.

Some transactions are exempt, and whether yours is covered depends on its details, so ask each funder whether it will provide the disclosure for your offer. If a funder tells you your offer is exempt, ask it to explain why in writing, and request the same core figures anyway. It also helps to understand how advances are built. They 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 have an attorney review anything unclear.

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What Must the Disclosure Include?

The disclosure presents a small set of figures in a clear format. Here is what each one means for you.

Total Cost of Financing

This is the total dollar cost: the fees, interest, and other charges you pay over the life of the deal. For an advance, it is the difference between the total repayment and the funding you receive. For a term loan, it is the interest plus fees.

Estimated Annual Percentage Rate

This expresses the cost of the financing as a yearly rate, so products of different lengths and structures can be compared. For an advance or a factoring arrangement, the rate is an estimate, because the repayment timeline depends on your sales or on when your customers pay. Use it as a comparison tool, and ask the funder what assumptions sit behind it.

Total Repayment Amount

The full amount you will pay back, meaning everything you received plus all fees and charges. This is the sum that will leave your bank account over the course of the deal.

Payment Schedule

How payments are taken and how often, whether daily, weekly, or monthly, and how much each payment is. For an advance, that might be a fixed daily bank debit or a percentage of card sales. For a line of credit, it might be a minimum monthly payment on what you have drawn.

Prepayment

The disclosure also tells you whether paying early changes your cost. With a loan, early payment often saves interest. With many advances, the full repayment amount is owed even if you pay early, unless the agreement offers a discount. If you expect to pay off early, this line matters a great deal.

How to Read and Use the Disclosure

Lay your disclosures side by side and start with two figures: the total dollar cost and the estimated APR. A lower APR generally means cheaper money over time, but also check the term and payment frequency. A short-term product with large daily payments can strain your cash flow even if its dollar cost is small.

Next, compare the funding provided with the amount quoted on the offer. If an origination or processing fee is deducted up front, you receive less than the headline figure while repaying based on the full amount. Then look for fees that could be added later, such as returned-payment or default charges, which appear in the contract. If anything seems missing, ask the funder to explain it in writing.

Here is why the funding figure deserves a close look. As an illustrative example, suppose an offer is for $25,000 at a factor rate of 1.25, so you would repay $31,250. If a $750 fee is taken out before funding, you receive $24,250, and your real cost is $7,000 rather than $6,250. Two offers with the same factor rate can differ by hundreds of dollars once up-front fees are counted.

Finally, remember that a disclosure is not a commitment. You can walk away after receiving one, use it to negotiate, or ask for a revised disclosure based on different terms, such as a longer repayment period or a smaller amount.

Questions to Ask Before You Sign

• What sales volume did you assume to estimate the term and APR, and what happens if my sales come in lower?
• Which fees are deducted before funding, and which could be added later?
• Can the payment amount change, and how would I request an adjustment?
• Is there a personal guarantee, and will you file a lien on my business assets?
• What exactly would I owe if I paid the balance off after three months, or after six?

Common Mistakes Business Owners Make

• Ignoring the estimated APR: Looking only at the factor rate or the payment amount can lead you to overpay. The annualized figure shows what time does to the cost.
• Not comparing multiple offers: One disclosure tells you the price of one deal. Two or three tell you what the market will offer your business.
• Assuming the disclosure is the contract: The disclosure is a summary. The agreement may contain guarantees, liens, default terms, and renewal provisions. Read both.
• Overlooking prepayment terms: If you expect to pay early, check whether doing so will actually save you anything.
• Missing a confession of judgment: Some agreements include one, and it can let a funder get a judgment quickly if you default. Several states restrict them, so look for one and ask an attorney before signing.
• Rushing to sign: The disclosure comes before signing so you have time to review it. Pressure to sign the same day is a red flag.

How a Free Matching Service Helps You Compare

Gathering and comparing disclosures from several funders takes time, especially while you are running a business. Business Funding Nearby is a free matching service, not a lender. You fill out one short form, and we connect you with vetted third-party funding partners who may be a fit for your needs. Each partner sends its own offer and disclosure, which you can review side by side. Using the service costs you nothing, we never promise approval, and you are not obligated to accept any offer. The cost of any funding you choose is set by the funder and shown in its terms.

What If the Funder Doesn't Provide a Disclosure?

If a funder asks you to sign before you have seen the disclosure, stop and ask for it in writing. If you received a disclosure but the contract does not match it, or the terms are different from what you were told, keep copies of every document and message and ask the funder in writing to explain the difference. Honest mistakes happen, and a revised disclosure that matches the contract resolves many problems. If the explanation does not hold up, you can report deceptive practices to the New York Attorney General's office or the FTC, and a business attorney can tell you what options you have.

Most reputable funders provide clear disclosures because transparency is how they earn repeat business. A funder that dodges the question is showing you how it may behave later, so walk away and choose a partner that answers plainly. Used well, the disclosure is a powerful tool: compare offers, ask questions, and choose funding that works for your business rather than against it.