New York Disclosure Laws: What Your Funding Offer Must Tell You
In short: New York's Commercial Financing Disclosure Law (CFDL) mandates that any business funding offer-including merchant cash advances, working capital loans, and lines of credit-must disclose the total cost of financing, the annualized percentage rate (APR), repayment terms, and any fees. This law aims to help you compare offers transparently. Always review these disclosures carefully before accepting any funding.
Key takeaways
- New York's CFDL requires funders to disclose total cost, APR, repayment amount, and term in a standard format.
- The law applies to most commercial financing over $2,500, including merchant cash advances, term loans, and lines of credit.
- You'll see an annualized percentage rate (APR) that reflects the true cost, including fees and origination charges.
- Disclosures must be provided before you sign any agreement, giving you time to compare offers.
What Is the New York Commercial Financing Disclosure Law?
New York's Commercial Financing Disclosure Law (CFDL) took effect in 2022 and was updated in 2024. It requires any company offering business funding-including merchant cash advances, working capital loans, equipment financing, and business lines of credit-to provide clear, standardized disclosures before you sign a contract. The law aims to level the playing field so you can compare offers based on real costs, not just marketing hype.
If you're a small-business owner in New York-or anywhere in the U.S. if the funder does business there-you're entitled to see the total cost of financing, the annualized percentage rate (APR), the repayment amount, and the term. This is a big deal because many funding products, especially merchant cash advances, historically buried fees and complex terms in fine print.
Merchant Advance Finder is a free matching service that connects you with vetted funding partners. We don't provide funding or make credit decisions, but we help you find partners who follow these disclosure rules. When you get matched, you'll receive an offer with the required New York disclosures-if applicable.
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Why This Law Matters for Your Business
Before the CFDL, comparing a merchant cash advance to a term loan was like comparing apples to oranges. One might quote a factor rate of 1.25 on $10,000 (meaning you'd repay $12,500), while another might quote an APR of 30%. Without a standard format, you couldn't easily see which was cheaper.
Now, every offer must include the total dollar cost, the APR (annualized percentage rate), the total repayment amount, and the payment schedule. This lets you compare apples to apples. For example, if one offer shows a total cost of $2,500 on $10,000 over 12 months, and another shows $1,800 over 6 months, you can decide which fits your cash flow.
The law also protects you from hidden fees. If a funder says there's an origination fee, a documentation fee, or a prepayment penalty, it must be listed in the disclosure. No surprises.
What Information Must Your Funding Offer Disclose?
Under the CFDL, your offer must include several key pieces of information in a clear, tabular format. Here's what to look for:
Total Amount of Financing
This is the principal amount you're receiving-the money that will hit your bank account (minus any upfront fees that are deducted). For a merchant cash advance, it's the purchase price the funder pays for your future receivables.
Total Dollar Cost of Financing
This is the total amount you'll pay in fees, interest, and charges over the life of the funding. For example, if you receive $10,000 and repay $12,500, the total dollar cost is $2,500. This number is crucial because it's the actual cost in dollars.
Annualized Percentage Rate (APR)
The APR is the annualized cost of the funding expressed as a percentage. It includes the interest rate plus any fees, origination charges, and other costs. For a merchant cash advance, the APR might be higher than a traditional loan because the repayment is tied to daily sales. The law requires this to be disclosed so you can compare across products.
Repayment Amount and Schedule
You'll see the total amount you must repay (the principal plus the total cost) and the frequency of payments-daily, weekly, or monthly. For a line of credit, the disclosure will show the draw period and repayment terms.
Term or Duration
The length of time you have to repay the funding. For a merchant cash advance, this is often estimated based on historical sales. For a term loan, it's a fixed number of months.
Fees and Charges
Any origination fees, documentation fees, late payment penalties, or prepayment penalties must be listed separately. If there's a fee for early repayment, it must be disclosed.
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How the Disclosure Works in Practice
Let's walk through a realistic example. Suppose you apply for a working capital loan of $50,000 through Merchant Advance Finder, and you get matched with a vetted funding partner. The offer you receive should include a disclosure table like this:
- Total Financing Amount: $50,000
- Total Dollar Cost: $8,000
- Annualized Percentage Rate (APR): 24.5%
- Total Repayment Amount: $58,000
- Payment Schedule: Weekly payments of $1,115.38 for 52 weeks
- Fees: Origination fee of $1,000 (included in APR)
This tells you everything you need to know: the cost in dollars, the percentage rate, and how often you pay. You can compare this to another offer that might have a lower APR but a shorter term, or a higher total cost but smaller weekly payments.
For a merchant cash advance, the disclosure might look different. Say you receive $20,000 in exchange for a factor rate of 1.25. The disclosure would show:
- Total Financing Amount: $20,000
- Total Dollar Cost: $5,000
- Annualized Percentage Rate (APR): 40% (estimated based on repayment term)
- Total Repayment Amount: $25,000
- Payment Schedule: Daily ACH withdrawals of $200 until repaid (estimated 125 days)
- Fees: None
Notice the APR is higher because the repayment is faster and the cost is spread over a shorter period. The disclosure helps you see that clearly.
Which Funding Types Are Covered?
The CFDL covers most commercial financing of $2,500 or more, including:
- Merchant cash advances
- Working capital loans
- Equipment financing
- Business lines of credit
- Invoice factoring or receivables financing
- Term loans
It does not cover leases, credit cards, or personal loans used for business. Also, transactions with a financial institution that has $10 billion or more in assets may have different rules. But for most small-business funding, the law applies.
How to Qualify for Funding with Transparent Disclosures
Qualifying for funding isn't about the disclosure-it's about your business's financial health. But knowing what to look for in a disclosure helps you choose the right funding partner. Here are steps to prepare:
Check Your Credit and Cash Flow
Funders will review your personal and business credit scores, your time in business, and your monthly revenue. For a merchant cash advance, they focus on daily credit card sales. For a term loan, they look at debt-to-income ratio.
Gather Documentation
Have your bank statements, tax returns, and business licenses ready. The faster you provide these, the quicker you'll get a disclosure.
Use a Free Matching Service
Merchant Advance Finder can connect you with vetted funding partners who comply with disclosure laws. You'll receive offers with the required information, making comparison easy.
Practical Tips for Reading Your Disclosure
Once you have the disclosure, don't just glance at it. Here's how to use it effectively:
- Focus on the Total Dollar Cost: This is the actual amount you'll pay above the principal. It's more concrete than the APR for short-term funding.
- Compare APRs Across Offers: The APR standardizes the cost, so you can compare a merchant cash advance to a term loan. But remember, a higher APR on a short-term product might still be cheaper in total dollars than a lower APR on a long-term loan.
- Check the Payment Schedule: Daily or weekly payments can strain cash flow. Make sure the schedule aligns with your revenue cycles.
- Look for Prepayment Penalties: Some funders charge a fee if you pay off early. The disclosure must list this. Avoid offers with high prepayment penalties if you plan to pay quickly.
- Ask Questions: If something is unclear-like how the APR is calculated or what fees are included-ask the funder. You have the right to an explanation.
Common Mistakes to Avoid
Even with clear disclosures, small-business owners can make costly errors. Here are pitfalls to watch for:
- Ignoring the APR: Some owners focus only on the total dollar cost and miss that a lower APR on a longer term might be cheaper overall. Always compare both.
- Assuming All Disclosures Are the Same: Not all funders use the same format. The CFDL standardizes key elements, but some details may vary. Read every line.
- Not Considering Cash Flow Impact: A low weekly payment might seem affordable, but if your business has seasonal dips, you could struggle. Factor in your revenue patterns.
- Rushing to Sign: You have time to review the disclosure. Don't let a funder pressure you into signing immediately. If they do, that's a red flag.
- Forgetting to Keep a Copy: Save the disclosure and the signed agreement. If there's a dispute later, you'll have proof of what was promised.
What If a Funder Doesn't Comply?
If a funding partner fails to provide the required disclosure, you have rights. The New York Department of Financial Services (DFS) can investigate and impose penalties. You can file a complaint with the DFS. Additionally, the law allows private lawsuits for violations. Always document your interactions and keep copies of all communications.
When you work with Merchant Advance Finder, we only connect you with vetted partners who are expected to follow all applicable laws, including New York's disclosure requirements. If you encounter an issue, let us know.
Final Thoughts: Use Disclosures to Your Advantage
New York's disclosure law is a powerful tool for small-business owners. It takes the guesswork out of comparing funding offers and helps you avoid hidden costs. The key is to read the disclosure carefully, compare multiple offers, and choose the one that best fits your business's cash flow and goals.
Remember, funding is a tool-not a solution to deeper financial problems. Use it wisely, and always prioritize transparency. If you're ready to explore your options, Merchant Advance Finder can match you with vetted funding partners who provide clear, compliant disclosures. It's free, and there's no obligation.