New York's Commercial Financing Disclosure Law: The Complete MCA Broker Compliance Guide

Why New York Changed the MCA Compliance Landscape

When New York Governor Andrew Cuomo signed S5470B into law on December 23, 2020, the MCA industry got its first major state-level mandate to disclose the annualized cost of merchant cash advances. After years of debate — and two more years of regulatory drafting — the New York Department of Financial Services (DFS) finalized its rules under 23 NYCRR Part 600, with compliance required for most providers starting August 1, 2023.

If you work in MCA — as a funder, broker, or ISO rep — and you do deals in New York, this law affects you directly. Non-compliance isn't a gray area: DFS has enforcement authority and can levy civil penalties on both providers and brokers who fail to deliver proper disclosures.

This guide breaks down exactly what the law requires, how APR is calculated for MCAs under the NY rules, and what brokers need to do differently when packaging a NY deal.

What the Law Covers — and What It Doesn't

New York's commercial financing disclosure law applies to commercial financing transactions of $2.5 million or less extended to a business located in New York. The law is deliberately broad. It covers:

• Merchant cash advances
• Sales-based financing (including revenue-based financing)
• Commercial loans
• Accounts receivable financing and factoring
• Commercial open-end credit plans
• Equipment financing and leases

The threshold is the deal size — not the company size. A $400,000 MCA to a mid-size restaurant chain in Manhattan is covered the same as a $25,000 advance to a Brooklyn bodega.

Who Is Exempt?

The law carves out several categories of providers who are not required to comply:

• Depository institutions — banks, savings associations, credit unions, and their subsidiaries regulated at the federal or state level
• Lenders regulated under the federal Farm Credit Act
• Technology service providers acting purely as software vendors with no commercial financing role

Importantly, most non-bank MCA funders — and virtually all ISO brokers — do not fall into any exemption. If you're a non-bank funder or an independent broker placing deals with New York merchants, you must comply.

The Six Required Disclosures for MCA Transactions

For sales-based financing and MCAs specifically, New York's regulations require a separate disclosure form delivered to the merchant before consummation of the transaction. The form must include all six of the following data points in plain language:

1. Disbursement amount — The actual dollar amount the merchant receives after fees and deductions.
2. Finance charge — The total dollar cost of the financing (purchase price minus disbursement, essentially the "profit" the funder earns).
3. Total payment amount — The total amount the merchant will repay (disbursement + finance charge).
4. Estimated term — The projected length of the advance based on historical revenue, stated in days, weeks, or months.
5. Payment details — The frequency and dollar amount (or percentage) of each payment or retrieval.
6. Annual Percentage Rate (APR) — The annualized cost of the financing, calculated using the estimated term.

Items 1–5 are straightforward for most MCA providers. Item 6 — the APR — is where the industry ran into the most friction, and for good reason.

How to Calculate APR for a Merchant Cash Advance Under NY Rules

MCA has always resisted APR framing because it's a purchase of future receivables, not a loan. But New York's law requires an APR-equivalent disclosure regardless. The DFS rules specify a method that essentially treats the advance as an amortizing loan for the purpose of the calculation.

Here is the simplified formula framework:

• Step 1: Determine the finance charge. Finance charge = Total repayment amount − Disbursement amount. For a $100,000 advance with a 1.35 factor rate, the repayment amount is $135,000 and the finance charge is $35,000.
• Step 2: Determine the estimated term. For sales-based financing, this is based on the merchant's average monthly revenue and the retrieval rate. If the merchant averages $50,000/month in card sales and the daily retrieval is $833 (roughly 5%), the estimated payoff is ~120 days (4 months).
• Step 3: Apply the actuarial method or a DFS-approved equivalent. Using the estimated term and the finance charge, calculate the annual rate that equates the present value of all payments to the disbursed amount. This is the disclosed APR.

In practice, a $100,000 advance at a 1.35 factor rate paid back over 120 days carries an effective APR of approximately 106% — a number that can startle merchants who aren't prepared for it. This is exactly what the law intends. Brokers who have been selling on factor rate alone now have to help merchants contextualize the APR alongside the short-term nature and the use-of-funds story.

The Estimated Term Problem

The single trickiest part of NY compliance is getting the estimated term right. The term drives the APR, and an inaccurate term produces an inaccurate APR. DFS requires that the estimated term be calculated using the merchant's recent revenue history — typically a 3-month average of card sales or total deposits, divided by the daily/weekly retrieval amount.

This means brokers must obtain accurate bank statements and POS data before a disclosure form can be generated. You cannot use a generic or "conservative" term estimate — it must be based on real data from that specific merchant's file.

Broker and ISO Obligations: You're on the Hook Too

One of the most important aspects of the NY law that many brokers missed at first: brokers who arrange commercial financing must also provide the disclosure form to the merchant, unless the provider has already done so and the broker can confirm it.

Under 23 NYCRR Part 600, a "broker" is defined as any person who, for compensation, arranges or assists in arranging a commercial financing transaction. That definition covers independent ISO brokers almost universally.

Your obligations as a broker include:

• Provide the disclosure form before the merchant signs. If your funder partner has a NY-compliant disclosure process and sends the form directly to the merchant, you may be able to rely on their process — but you need written documentation confirming this arrangement.
• Do not misrepresent the disclosed terms. Verbally telling a merchant their "effective rate" is different from what's on the disclosure form is a violation regardless of which number is "more favorable."
• Maintain records. DFS may require you to demonstrate that disclosures were delivered. Keep signed disclosure receipts or electronic delivery confirmations for at least three years.
• Register with DFS if required. As of mid-2026, DFS has begun requiring commercial financing brokers placing deals with NY merchants to register. Check the current DFS guidance on broker registration thresholds.

Penalties for Non-Compliance

Non-compliance with the NY commercial financing disclosure law is not a technical violation that slides under the radar. DFS has enforcement authority and has signaled its intent to use it. Penalties include:

• Civil penalties up to $2,000 per violation for unintentional non-disclosure
• Civil penalties up to $10,000 per violation for willful non-disclosure
• Injunctive relief — DFS can seek court orders requiring compliance
• Reputational and deal-level consequences — merchants can contest deals where proper disclosures were not made

Importantly, each transaction without a proper disclosure is a separate violation. If you run 50 NY deals a month without compliant disclosures, you're looking at 50 individual penalty events per month.

How New York Compares to California and Texas

By mid-2026, three major states have enacted commercial financing disclosure laws that directly affect MCA. Understanding how they compare helps brokers build a single compliance workflow that works across all three:

California (SB 362 / CFL Regulations): Effective December 9, 2022 for most providers. Covers transactions under $500,000. Requires disclosure of APR, total dollar cost, payment amount and frequency, and estimated term. California uses an "assumed term" methodology similar to NY. Brokers must register with the DFPI.

New York (S5470B / 23 NYCRR Part 600): Effective August 1, 2023. Covers transactions under $2.5 million — a much higher threshold than California, capturing mid-market deals California's law misses. Six required disclosures. Brokers must provide or confirm the disclosure and maintain records.

Texas (HB 700 / Texas Finance Code Chapter 394A): Effective September 1, 2023. Covers transactions under $500,000 to Texas-based businesses. Requires disclosures of finance charge, total repayment, and APR. Texas introduced a unique "broker disclosure" requirement: ISOs must disclose their compensation to the merchant if it exceeds certain thresholds.

The practical takeaway: if you're a broker placing deals nationally, you need a disclosure workflow that handles all three states — and you should be building that workflow to handle every state as a baseline, since more states are likely to follow.

Building a NY-Compliant Process for Your Brokerage

Compliance doesn't have to mean complexity. Here's a practical system that works for most broker shops:

1. Flag NY Deals at Intake

When a merchant lead comes in, capture the business's state of incorporation and primary operating location. Any merchant with a New York address triggers your NY disclosure protocol. Add this as a required field in your CRM or deal intake form.

2. Confirm Funder Disclosure Responsibility

Contact your funder partners and get written confirmation of who sends the disclosure form and when. Ideally, request sample disclosure forms from each funder to verify they are compliant with 23 NYCRR Part 600. Document this in your ISO agreement or in a separate compliance addendum.

3. Use Accurate Revenue Data for APR Calculations

Never estimate or round up the merchant's revenue when calculating the disclosure figures. Pull 3 months of bank statements and/or processing statements and use the average as your basis. An inaccurate APR disclosure is a violation even if the error is favorable to the merchant.

4. Deliver and Document the Disclosure

The disclosure must be delivered before the merchant signs the funding agreement. If using DocuSign or a similar platform, build the disclosure form as a separate document that appears first in the signing packet. Capture the timestamp of delivery and acceptance.

5. Store Records for Three Years

Maintain signed or electronically acknowledged disclosure forms for a minimum of three years. Cloud storage with deal-level folders keyed to your CRM deal ID is sufficient. DFS can audit your records — you want to be able to pull any deal's disclosure within minutes.

6. Train Your Team Annually

Sales reps and processors should understand what the disclosure is, why it exists, and what they're not allowed to say that contradicts it. A quick annual training session and a one-page reference card is enough for most small broker shops.

Communicating APR to Merchants Without Losing the Deal

Many brokers fear that showing a merchant a triple-digit APR will kill the deal. In practice, context matters far more than the number itself. Here's how experienced brokers handle the APR conversation:

Lead with the total cost, not the rate. "This advance costs you $35,000 for access to $100,000 over 4 months" is easier for most business owners to evaluate than "the APR is 106%." The total cost is what's on the disclosure form — walk them through that first.

Compare to the opportunity cost. If the merchant needs working capital to fulfill a large order, buy discounted inventory, or cover payroll during a slow month, compare the $35,000 cost against the cost of missing the opportunity. The math often favors the advance.

Acknowledge the APR directly. Trying to minimize or explain away the APR disclosure creates trust problems. Say "Yes, the APR looks high when annualized, and here's why that number can be misleading for a 4-month product..." then explain the short-term nature and flexibility of the product.

Use the disclosure form as a sales tool. Merchants who receive clear, upfront disclosures are more likely to trust the broker and return for renewals. Treat the disclosure as a demonstration of your professionalism, not an obstacle.

What's Coming Next: Federal Disclosure Requirements on the Horizon

New York, California, and Texas were early movers, but they won't be the last. As of 2026, additional states including Virginia, Florida, Georgia, and Utah are in various stages of introducing or advancing commercial financing disclosure legislation. The federal Small Business Administration has also signaled interest in standardized disclosure frameworks for non-bank SMB lending.

Brokers who build robust state-level disclosure compliance now will have a significant operational advantage as these requirements spread. The infrastructure you build for NY — deal flagging, funder coordination, documentation workflows — translates directly to every new state that passes similar laws.

The Practical Takeaway

New York's commercial financing disclosure law is not optional and it is not going away. If you're placing MCA deals with New York merchants and you don't have a documented disclosure process, you're exposed — both legally and competitively. Brokers who take compliance seriously build merchant trust, reduce dispute risk, and position themselves as professionals in a market that is maturing rapidly.

The checklist is straightforward: flag NY deals at intake, confirm your funder's disclosure workflow in writing, calculate APR using real merchant revenue data, deliver the form before signing, and store your records. That's the entire compliance burden in five steps. The brokers who treat this as a system — not a paperwork annoyance — are the ones who will still be operating cleanly when DFS enforcement actions start making headlines.

If you work with verified MCA funders through the MCA Directory, ask each funder partner directly whether their disclosure forms are 23 NYCRR Part 600 compliant and who bears responsibility for delivery. That single conversation, documented in writing, is the most important compliance step you can take today.