Find Me Funders
Disclosure law
Also called commercial financing disclosure law, state disclosure law, small business truth in lending.
State statutes requiring providers of small-business financing to give the applicant a standardized cost disclosure before signing, in some states including an annual percentage rate.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Consumer credit has carried standardized disclosure since the Truth in Lending Act. Commercial financing did not, which is how a product priced with a multiplier came to be sold alongside products priced with a rate. Several states have since imposed their own regimes.
California and New York went furthest, requiring an APR or estimated APR for sales-based financing along with the total dollar cost, the financing amount, payment amounts and any prepayment terms. Utah and Virginia took a lighter route built around provider registration and disclosure without an APR figure. Other states have adopted their own variants since, and the differences between them are substantial: what triggers coverage, what size of transaction is caught, which providers are exempt, whether brokers must register, and what the form actually says.
Coverage usually turns on where the recipient is located rather than where the funder sits, and bank exemptions are common. This area is still moving, so the operative question is what the rule is in the recipient's state on the date of the transaction.
Where this one catches people
Disclosure is not regulation of price. None of these statutes caps what may be charged; they standardize how it is described so two offers can be compared. And where an estimated APR appears on a sales-based financing disclosure it depends on an assumed repayment period, because the schedule is not fixed. Change the assumption and the disclosed APR moves, without a word of the contract changing.
Where you will meet this term
Read next
Disclosure law — common questions
What does disclosure law mean?
State statutes requiring providers of small-business financing to give the applicant a standardized cost disclosure before signing, in some states including an annual percentage rate.
Where does disclosure law catch people out?
Disclosure is not regulation of price. None of these statutes caps what may be charged; they standardize how it is described so two offers can be compared. And where an estimated APR appears on a sales-based financing disclosure it depends on an assumed repayment period, because the schedule is not fixed. Change the assumption and the disclosed APR moves, without a word of the contract changing.
Is disclosure law the same as an interest rate?
Disclosure law is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does disclosure law apply to?
Merchant Cash Advance, Working Capital, Invoice Financing, Revenue-Based Financing.
Is there a worked example of disclosure law?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside disclosure law?
Broker Fee, Effective APR, Factor rate, Independent sales organization, Total cost of capital.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.