Commercial Financing Disclosure: Meaning in a Merchant Cash Advance
A commercial financing disclosure is a standardized statement some states require funders and brokers to give business owners before they sign, showing the total cost, the estimated APR, the payment terms and other key figures for the financing offered.
What does commercial financing disclosure mean?
Consumer loans have long come with required disclosures. Several states now require something similar for business financing, including merchant cash advances. Before you sign, you receive a form that lays out what you'll receive, what you'll repay, how payments work and an estimated annual rate, so you can compare offers on a common footing.
Why does commercial financing disclosure matter to your business?
The disclosure gives you numbers you can compare across offers and products. It also flags fees and prepayment terms in one place. Read it next to the contract. If the disclosure doesn't match what you were told, ask why before signing.
What does the disclosure usually show?
- The funding amount and the amount disbursed after fees.
- The total repayment amount and the finance charge.
- An estimated annual percentage rate.
- The payment amount and frequency.
- Prepayment terms.
Are the numbers estimates or promises?
For sales based financing, some figures, like the APR and term, rest on estimates of your future sales.
Do brokers hand you the disclosure?
In some states, brokers have their own obligations around disclosures and registration. Ask whoever presents your offer whether a disclosure applies in your state and when you'll receive it, so it arrives before you sign rather than after.
Where will you see it?
In states with disclosure laws, as a separate form or addendum in your closing documents. California and New York are two states with commercial financing disclosure rules, and others have adopted similar laws.
Which terms are related to commercial financing disclosure?
The full list is in the glossary. Owners ask about this in What should I do if I get a demand letter from an MCA funder?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.