Glossary · legal

Lending license

Also called commercial lender license, finance lender license, broker license.

State authorisation to make or broker loans, required in some states, for some products, at some sizes — and largely absent from the merchant cash advance market because an advance is not structured as a loan.

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

There is no federal licence to lend to businesses. Licensing is state law, and the patchwork is genuinely inconsistent.

The shape of the variation

  • Many states license only consumer lending and leave commercial lending unlicensed
  • Some license commercial lenders. California's Financing Law is the best-known example, covering commercial lenders and, in some circumstances, brokers
  • Some license loan brokers separately from lenders, with bonding requirements
  • Several impose thresholds by transaction size, so smaller commercial loans are regulated and larger ones are not, or the reverse
  • A few regulate merchant cash advance specifically — registration regimes for providers and brokers have been enacted in some states, and more have been proposed

Disclosure laws are a separate thing

California, New York, Utah, Virginia, Georgia and others have enacted commercial financing disclosure statutes requiring standardised cost disclosure — including, in some of them, an APR or estimated APR for products that do not have a rate. These obligations attach to providers and sometimes to brokers regardless of licensing, and the required disclosures and thresholds differ state by state. Effective dates and scope have shifted repeatedly.

What an unlicensed lender risks

Depending on the state: penalties, and in some cases unenforceability of the contract or forfeiture of interest. Which is why licensing status is one of the arguments raised when a merchant challenges an advance.

Where this one catches people

"Licensed lender" in marketing copy is close to meaningless without knowing which licence, from which state, and whether it covers your transaction. A company may hold a California Financing Law licence and lend to you in a state where it needs nothing, or hold a licence for a product it is not selling you. Conversely, an unlicensed funder is not necessarily operating unlawfully — most states do not require a licence for commercial funding, and a receivables purchase is generally not treated as lending at all. The absence of a licence tells you about the product's legal characterisation, not about the funder's legitimacy.

Where you will meet this term

Merchant Cash Advance Working Capital Term Loan

Read next

Commercial financing disclosure law (CFDL)State statutes requiring standardized cost disclosures on small commercial financing, including cash advances… Independent sales organization (ISO)A sales firm that originates funding applications and places them with funders for a commission — the party m… LenderThe party whose money is actually at risk in the transaction — which is frequently not the party that markete… Loan brokerAn intermediary who places a borrower's file with lenders for a commission, sitting between the business and … True LenderThe doctrine asking which party is really making a loan when a bank is named on the note but a non-bank marke… UsuryCharging interest above what state law permits on a loan; the doctrine applies to loans, which is why the loa…

Lending license — common questions

What does lending license mean?

State authorisation to make or broker loans, required in some states, for some products, at some sizes — and largely absent from the merchant cash advance market because an advance is not structured as a loan.

Where does lending license catch people out?

"Licensed lender" in marketing copy is close to meaningless without knowing which licence, from which state, and whether it covers your transaction. A company may hold a California Financing Law licence and lend to you in a state where it needs nothing, or hold a licence for a product it is not selling you. Conversely, an unlicensed funder is not necessarily operating unlawfully — most states do not require a licence for commercial funding, and a receivables purchase is generally not treated as lending at all. The absence of a licence tells you about the product's legal characterisation, not about the funder's legitimacy.

Is lending license the same as an interest rate?

Lending license 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 lending license apply to?

Merchant Cash Advance, Working Capital, Term Loan.

Is there a worked example of lending license?

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 lending license?

Commercial financing disclosure law, Independent sales organization, Lender, Loan broker, True Lender.

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.