Commercial financing disclosure law CFDL

Federal Truth in Lending covers consumer credit, not business-purpose credit, which is why a business can be quoted a factor rate with no annualized figure while a consumer cannot be quoted a car loan that way. States have been closing that gap since California enacted SB 1235, whose regulations took effect in December 2022, followed by New York's Commercial Finance Disclosure Law, effective for covered transactions from August 2024.

Others have followed with different designs. Utah, Virginia, Florida, Georgia, Connecticut, Kansas and Missouri have all enacted commercial financing statutes, and the requirements differ in important ways: California and New York require an APR or annualized rate figure, while several of the others require dollar-cost, term and payment disclosures without APR, and some pair disclosure with provider or broker registration rather than substantive terms.

Coverage is defined by transaction size and type. The statutes generally reach loans, open-end credit, factoring and sales-based financing below a stated dollar threshold, with exemptions for banks, for real-estate-secured transactions, for larger deals and often for providers doing only a handful of transactions a year in the state.

For sales-based financing with no fixed term, an APR has to be estimated, so the statutes prescribe how to project the repayment period. That estimate is a disclosure, not a promise, and the actual annualized cost moves with your receipts.