New Texas Law Imposes Disclosure and Registration Rules on Merchant Cash Advances

On June 20, Texas Governor Greg Abbott signed into law House Bill 700. The new legislation, which goes into effect on September 1, 2025, introduces a comprehensive regulatory framework for commercial sales-based financing and places new obligations on providers and brokers operating in the state.

Under the new law, providers of financing products such as merchant cash advances must now register with the Texas Office of Consumer Credit Commissioner and deliver detailed written disclosures for transactions under $1 million. These disclosures must include the total financing amount, disbursement amount, repayment terms, monthly payment estimates, all applicable fees, collateral requirements, and broker compensation. 

In terms of scope, the law applies to both purchase-of-receivables and revenue-based loan products with variable payments tied to business sales. However, several entities are exempt from these requirements, including banks, credit unions, affiliates, select tech service providers with no stake in the transaction, and certain auto dealers and manufacturers.

While most disclosure obligations become enforceable in September 2025, registration requirements will not take effect until December 31, 2026. Importantly, the registration requirement applies to all providers and brokers of sales-based financing, regardless of transaction size, meaning that even companies dealing solely in amounts over $1 million must still comply.

Texas now joins a growing number of states, including California, that are tightening rules around commercial financing.