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Usury cap
Also called interest rate cap, maximum lawful rate, rate ceiling.
The maximum interest rate a state permits on a loan, set by statute, differing by state, by type of lender and often by whether the borrower is an individual or a business entity.
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 general usury cap on commercial credit. Each state legislates its own, and the resulting map is genuinely inconsistent. Common structural features across states include a general civil cap, separate and sometimes higher ceilings for particular lender types or transaction sizes, and in some states a distinct criminal usury provision with its own threshold and its own consequences.
Several states exempt or partially exempt loans to corporations and other business entities from their civil caps, on the reasoning that a business borrower does not need the same protection as a consumer. Where that exemption exists, the practical ceiling on business lending may be a criminal usury provision rather than a civil one, or nothing at all. Some states also allow parties to contract for a higher rate in defined circumstances.
The consequence of exceeding a cap also varies: forfeiture of interest above the cap, forfeiture of all interest, voiding the loan entirely, statutory penalties, or criminal exposure. Those are very different outcomes and they are why the applicable state matters so much.
Bank preemption sits over the top of all of it. Federally chartered and certain state-chartered banks may export the rate permitted by their home state, which is why the location of a bank partner in a lending programme is not incidental.
Where this one catches people
Reaching for a state's headline cap number and applying it to a business advance skips three separate questions: whether the transaction is a loan at all, whether that state's cap reaches business or corporate borrowers, and which state's law governs given the choice-of-law clause and the forum. Any one of those can dispose of the point before the number is ever relevant. Caps also change by legislation, so a figure found online may not be current.
Where you will meet this term
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Usury cap — common questions
What does usury cap mean?
The maximum interest rate a state permits on a loan, set by statute, differing by state, by type of lender and often by whether the borrower is an individual or a business entity.
Where does usury cap catch people out?
Reaching for a state's headline cap number and applying it to a business advance skips three separate questions: whether the transaction is a loan at all, whether that state's cap reaches business or corporate borrowers, and which state's law governs given the choice-of-law clause and the forum. Any one of those can dispose of the point before the number is ever relevant. Caps also change by legislation, so a figure found online may not be current.
Is usury cap the same as an interest rate?
Usury cap 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 usury cap apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit.
Is there a worked example of usury cap?
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 usury cap?
Annual percentage rate, Cash advance, Choice of law, Truth in Lending Act, Usury.
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.