Since August 1, 2023, a New York business that receives a merchant cash advance offer has a legal right to see the cost in writing before signing. The New York Commercial Finance Disclosure Law, Article 8 of the Financial Services Law, and the regulation that implements it, 23 NYCRR Part 600, require most providers to hand over a standardized disclosure with every specific offer of financing up to $2.5 million. This guide explains who the law covers, what the disclosure has to show on a sales-based deal like an MCA, how the estimated APR on it is worked out, and what the law does not do. It is an orientation, not legal advice.
Who the law covers
The law applies to specific offers of commercial financing of $2.5 million or less made to businesses that are New York residents or are principally directed or managed from New York. A merchant cash advance counts as sales-based financing, one of the financing types the regulation names. Brokers who pass an offer along must transmit the disclosure and keep evidence that they did.
Several providers are exempt: banks and other regulated financial institutions and their subsidiaries, providers that make five or fewer commercial financings in New York in a twelve-month period, true leases, financings secured by real property, financings of $50,000 or more to car dealers or rental companies, and financings above $2.5 million. Financing for personal, family or household use is outside the law entirely.
What the disclosure has to show on a merchant cash advance
For sales-based financing the regulation prescribes a table with ten rows. The rows are: Funding Provided, which is the amount purchased and, if different, the funds you actually receive after fees; Estimated Annual Percentage Rate, labeled exactly that way; Finance Charge, the dollar cost of the deal; Estimated Total Payment Amount, what you are expected to remit in total; Estimated Payment, the average periodic remittance and how often it is taken; Payment Terms, including how any true-up works and whether there is a minimum payment; Estimated Term, how long the remittances are expected to run; Prepayment, what happens to the finance charge and fees if you pay off early; and Collateral Requirements. Where payments are not monthly, an Estimated Monthly Cost row is added so offers can be compared on the same basis.
The provider must get your signature on the disclosure before proceeding with the application. If the funds disbursed are less than the amount financed, an itemization showing where the difference went is required as well.
Why the APR is an estimate
A merchant cash advance has no fixed term. You remit a share of receivables until the purchased amount is delivered, so how long that takes depends on your sales. That is why the regulation calls the figure an estimated APR and requires the word estimate on it. The APR itself is calculated the same way as on a loan, using the actuarial method in the federal Truth in Lending rules, but the payment schedule it is based on is a projection.
The regulation allows two ways to build that projection. Under the historical method, the provider uses your average monthly sales through the payment channel over a fixed look-back period of four to twelve months. Under the opt-in method, the provider uses its own internal sales projection, but it must audit paid-off deals every year, compare the APR it disclosed with the APR that actually happened, and switch back to the historical method for two years if the gap exceeds set thresholds. Either way, the disclosure has to state the assumptions behind the estimate in plain language.
How to use the disclosure when comparing offers
Read the Finance Charge and Estimated Total Payment Amount first; those are the dollars. Then read the Estimated Payment and Estimated Term together, because the same total cost spread over a shorter term is a heavier daily pull. Use the Estimated APR to compare an MCA offer with a term loan or line of credit on the same scale, keeping in mind that it is a projection. And read the Prepayment row before you consider consolidating later, because it tells you whether paying off early changes what you owe. Our guide to factor rates versus APR walks through the math behind these numbers.
What the law does not do
It does not cap rates or fees, does not set a maximum remittance, does not make a merchant cash advance a loan, and does not clearly give you a private right to sue a provider over a defective disclosure; enforcement sits with the Department of Financial Services, which can impose civil penalties of $2,000 per violation, or $10,000 per willful violation, and order restitution. It also does not apply to offers above $2.5 million or to the exempt providers listed above. A disclosure tells you the cost of an offer; it does not tell you whether the offer is a good idea for your business.
How we handle it
Y Millennial Funding is a New York direct funder. Every specific offer we make to a New York business comes with the Part 600 disclosure, and you will have it before anything is signed. We also show the same figures on consolidation offers: the payoff balance on each existing position next to the new total, so the comparison is between whole numbers and not daily ones. A merchant cash advance is a purchase of future receivables, not a loan. Funding amounts, terms and timing depend on business performance and underwriting, and not all applicants qualify.