Texas merchant cash advance law: what your offer has to show
Texas regulates commercial sales-based financing, the category most merchant cash advances fall into, under Finance Code chapter 398. Providers and brokers have to register with the Office of Consumer Credit Commissioner, deals under $1 million need a cost disclosure, a confession of judgment is void, and automatic debits are limited.
Which offers the Texas law covers
Chapter 398 covers commercial sales-based financing to Texas recipients. The disclosure applies to transactions under $1 million. Banks, credit unions and some other providers are exempt. The OCCC's rules add detail on registration and on what counts as an automatic debit.
The disclosure, line by line
A Texas disclosure has to show:
| Line on the form | What it tells you | Check it against |
|---|---|---|
| Total amount of the financing | The headline advance | The purchase price in the contract |
| Disbursement amount | What reaches you after fees and payoffs | Your funding-day deposit |
| Finance charge | The total cost | Payback minus disbursement |
| Total repayment amount | Everything you'll deliver | The purchased amount |
| Estimated payment period and schedule | How long, how often, how much | The ACH authorization |
| Other fees, prepayment charges, collateral | Costs outside the finance charge and what secures the deal | The fee schedule and UCC section |
| Broker compensation | What the provider pays a broker | Ask the broker to confirm it |
Do brokers have to register?
Yes. Providers and brokers of commercial sales-based financing register with the OCCC through NMLS and renew each year. Ask a broker for its Texas registration before you send a file.
Confession of judgment
A confession of judgment clause in a commercial sales-based financing contract is void under § 398.055. Section 398.056 also bars an automatic debit unless the provider holds a perfected first-priority security interest in the account, and the OCCC's rules treat more than one prewritten check as an automatic-debit mechanism.
Where to raise a problem
Complaints go to the Texas OCCC.
What the debit rule means for you
If a Texas deal uses a daily ACH debit, ask the provider how it meets § 398.056. A second-position funder usually can't hold a first-priority interest in the same account, which changes how a second position gets structured.
Sources
- Texas Finance Code, chapter 398 (commercial sales-based financing)
- Texas OCCC: commercial sales-based financing registration
This is general information, not legal advice. For your contract and your state, talk to a business lawyer. This page gets a legal review before it's indexed.
Funding a Texas business?
We check which funders fit and what the offer has to show before anything goes out. 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.