State Lending Regulations Changing 2026
Commercial finance disclosure laws are expanding across states in 2026. Here is what the new regulations mean for small business borrowers.
The Commercial Finance Disclosure Wave
California's commercial finance disclosure law, which went into effect in 2022, was the opening salvo. New York followed with its own disclosure requirements. By 2026, eleven states have enacted some form of commercial finance disclosure law, with legislation pending in another nine. These laws apply to commercial lending products that were previously unregulated: merchant cash advances, revenue-based financing, and other non-loan financing structures. The core requirement in most of these laws is annual percentage rate (APR) disclosure. Lenders offering MCAs, revenue-based financing, and similar products must now calculate and disclose a standardized APR — the same disclosure required of consumer lenders for decades. This allows borrowers to make apples-to-apples comparisons across product types.
What Changes for Borrowers
In practical terms, these disclosure laws mean that when you apply for a merchant cash advance or revenue-based financing product in a covered state, you will receive a standardized disclosure document showing the estimated APR, total financing cost, and other key terms before you sign. This is meaningful because MCA factor rates and RBF costs can translate to APRs that are significantly higher than they appear at first glance. A 1.3 factor rate on a 6-month MCA, for example, translates to an APR of approximately 87% when annualized. Disclosure requirements force this transparency, empowering borrowers to make genuinely informed decisions. Lenders who previously competed on obscure factor rates must now compete on standardized, comparable terms.
Broker Regulation Is Also Evolving
Several states are also expanding regulation to commercial finance brokers — intermediaries who connect borrowers with lenders. New requirements in some states include registration, disclosure of broker compensation, and prohibitions on certain practices that were previously unregulated in commercial finance. For borrowers, working with a registered broker in a regulated state provides additional consumer protections. You should be told how much your broker earns from placing your financing, which creates accountability and reduces the incentive to recommend higher-cost products.
The Federal Regulatory Landscape
At the federal level, the Consumer Financial Protection Bureau has expanded its attention to small business lending through its Section 1071 rulemaking, which requires lenders to collect and report demographic data on small business loan applications. While primarily a fair lending measure, Section 1071 implementation is requiring lenders to build new data collection infrastructure that may change how they interact with borrowers during the application process. Additionally, the SBA continues to update its standard operating procedures for the 7(a) and 504 loan programs. In 2026, updates to the SBA's lender criteria and guaranty fee schedules took effect, modestly reducing costs for borrowers in certain size ranges.
What Borrowers Should Do
These regulatory changes are net positive for borrowers, but you need to engage with the new disclosures rather than signing without reading. When you receive an offer for commercial financing, read the disclosure document carefully. Focus on the estimated APR, total repayment amount, and any fees. Compare these standardized numbers across offers rather than comparing factor rates or cost percentages that may be calculated differently. If you are in a state that has not yet enacted commercial finance disclosure laws, be particularly vigilant about requesting and understanding full cost disclosures. Ask any lender to provide the estimated APR and total financing cost in writing before you sign.
