New York's Commercial Finance Disclosure Law (S5470, effective August 1 2023) requires any commercial financing provider to give you a standardized written disclosure before you sign — including an estimated APR and the total cost in dollars. If you don't get one, the provider is breaking New York law.
TL;DR
| What you need to know | The answer |
|---|---|
| Law name | Commercial Finance Disclosure Law (CFDL), Article 8 of NY Financial Services Law |
| Senate bill | S5470-B (signed December 23, 2020) |
| Implementing regulation | 23 NYCRR 600 (NY Department of Financial Services) |
| Effective date | August 1, 2023 |
| Products covered | MCAs, term loans, lines of credit, factoring, sales-based financing — up to $2.5 million |
| Key requirement | Standardized written disclosure with APR before you sign |
| Who must comply | All providers offering commercial financing to NY-based businesses |
| Penalty for violations | Up to $2,000 per violation; up to $10,000 per willful violation |
What Is New York S5470 and Why Did It Pass?
For most of the 2010s, merchant cash advance providers could advance money to a small business without disclosing anything resembling a cost. No APR, no standardized total payment figure, often nothing more than a factor rate buried in a dense contract. New York businesses were especially exposed because many of the largest MCA funders operate out of New York, and New York courts were being used to file tens of thousands of confessions of judgment against small businesses nationwide.
Senate Bill S5470-B changed that. Signed into law in December 2020 and now administered under 23 NYCRR 600, the Commercial Finance Disclosure Law gives New York small businesses the same kind of standardized cost transparency that federal Truth in Lending Act (TILA) gives consumers — applied to commercial financing for the first time.
New York’s approach goes further than California’s SB 1235 in one critical way: it requires an annual percentage rate (APR) figure, not just a dollar cost. That single requirement makes it possible to compare an MCA against a bank term loan on the same measuring stick.
Which Businesses and Deals Are Covered?
The CFDL applies when two conditions are met:
- The financing is $2.5 million or less, and the proceeds are intended for business (not personal, family, or household) use.
- The borrower is a New York business — meaning a company principally directed or managed from New York, or a natural person who is a legal NY resident.
Products covered: closed-end term loans, open-end lines of credit, merchant cash advances, sales-based financing, factoring transactions, and finance leases.
Key exclusions:
- Transactions over $2.5 million
- Real property-secured financing (mortgages)
- Federally chartered banks, credit unions, and their majority-owned subsidiaries
- Providers making five or fewer commercial financing transactions in New York per year
- Lenders under the federal Farm Credit Act
The out-of-state lender rule matters: if your business is in New York, a California-based MCA funder must still give you a compliant NY disclosure. The provider may ask for a written statement confirming your New York location.
What the Disclosure Must Include
The regulations specify different table formats by product type. For a merchant cash advance (classified as sales-based financing), the required disclosure is a 10-row, 3-column table with these fields, in order:
| Field | What it means |
|---|---|
| Funding Provided | Total advance amount and net funds you receive after fees |
| Estimated APR | Annualized cost, calculated per federal Regulation Z Appendix J |
| Finance Charge | Total dollar cost of the advance (all unavoidable fees included) |
| Estimated Total Payment Amount | Full amount you’ll repay under the contract |
| Estimated Payment | Estimated holdback amount and frequency |
| Payment Terms | The holdback percentage of your daily/weekly sales |
| Estimated Term | Estimated repayment period based on historical sales |
| Prepayment | What happens (and what it costs) if you pay early |
| Collateral Requirements | UCC lien or other security interest |
| Avoidable Fees | Any fees you can avoid by taking specific actions |
“Estimated” appears throughout the MCA table because MCA repayment floats with your actual sales volume — if sales drop, your daily holdback drops and the term extends. The provider uses your historical sales average to calculate the estimate. You should receive a note on the disclosure explaining that actual APR and term may vary.
For a closed-end term loan, the same 10-field structure applies but uses exact figures instead of estimates.
For a line of credit, APR assumes you draw the full limit upfront and make minimum payments — a worst-case cost scenario that lenders must disclose.
The provider must obtain your signature on the disclosure before proceeding. A verbal summary or email without a signature does not satisfy the law.
How the APR Is Calculated
This is the detail most MCA guides skip over. Under 23 NYCRR 600.3, providers must use either the United States Rule method or the Actuarial method — both defined in Appendix J of 12 C.F.R. Part 1026 (federal Regulation Z). Both treat the advance as having daily cash flows and measure the internal rate of return over the repayment period.
The practical consequence: a $100,000 MCA at a 1.30 factor rate repaid over six months typically shows an estimated APR of roughly 120–150%, not 30%. The factor rate of 1.30 looks moderate; the APR shows you the full speed of the cost. That difference is exactly what the law is designed to surface.
The regulation allows a small APR tolerance of up to ⅛% or ¼% above or below the calculated rate.
New York vs. California: How the Disclosure Laws Compare
| Feature | New York S5470 / CFDL | California SB 1235 |
|---|---|---|
| Effective date | August 1, 2023 | December 9, 2022 (regulations) |
| APR required | Yes — estimated APR is mandatory | No — cost disclosure doesn’t require APR format |
| Transaction threshold | $2.5 million | $500,000 (expansion proposed, not yet in force) |
| Brokers covered | Yes — explicit broker disclosure obligation | Limited |
| Penalties | Up to $10,000 per willful violation | Up to $2,500 per willful violation (California Financing Law) |
| Model forms | None provided — provider must build compliant table | None provided |
For a broader comparison of state MCA laws, see our New York MCA guide and the California MCA disclosure overview.
What Brokers Must Disclose
New York’s law is one of the few that explicitly names brokers as covered parties. If a broker arranges or solicits financing on your behalf, the financer (lender) must give you a written statement disclosing:
- That the broker will be compensated
- How the broker will be compensated
- By whom the broker will be compensated
This disclosure is separate from the standardized cost table — broker compensation was removed from the main disclosure form during the rulemaking process but still requires its own written statement. If a broker tells you “we’re free to the borrower,” get that in writing, because the funder is paying them one way or another, and that compensation can inflate the cost of your advance.
What Happens If You Don’t Receive a Disclosure?
If a provider makes you a formal offer for NY commercial financing without a compliant CFDL disclosure, they are violating 23 NYCRR 600. Here’s what you can do:
- Ask in writing. Email the provider asking for the required CFDL standardized disclosure before you sign. A legitimate provider will send it immediately.
- Do not sign without it. Signing doesn’t waive your legal protections, but having a compliant disclosure in hand gives you a factual baseline.
- Report the violation. The NY Department of Financial Services accepts complaints at dfs.ny.gov. The DFS can impose penalties and order restitution.
- Consult an attorney. If you’ve already signed a contract without receiving the required disclosure, an attorney can assess whether the omission affects enforceability.
The penalties aren’t just symbolic. Up to $10,000 per willful violation represents real exposure for high-volume MCA funders, and the NY AG has shown it will pursue bad actors in this space — most visibly with the January 2025 ~$1.065 billion judgment against Yellowstone Capital for predatory MCA practices.
How to Read the Disclosure You Receive
When your provider hands you the CFDL table, focus on three numbers:
1. Estimated APR. This is the apples-to-apples comparison number. An MCA with an estimated 180% APR costs about as much as a credit card charging 15% APR over the same period — just compressed into months instead of years. Compare this to what your bank would charge.
2. Finance Charge. This is the total cost in dollars. For a $75,000 advance at a 1.35 factor rate, the finance charge is $26,250. There’s no ambiguity here.
3. Estimated Total Payment Amount. Add the finance charge to the funding amount to get this number. If your advance is $75,000 and the total payment is $101,250, you’re repaying $26,250 in fees.
If those numbers feel too high, our MCA cost calculator lets you run different factor rate and term scenarios before you commit to anything. The calculator uses the same IRR-based methodology the CFDL requires.
A Note for Out-of-State Lenders Offering NY Deals
If you’re a small business owner in New York, you have a right to the CFDL disclosure regardless of where your lender is headquartered. If a lender says “we’re based in Florida, the New York law doesn’t apply to us” — that’s wrong. The law follows the borrower’s location. You can tell the provider: “The NYDFS’s 23 NYCRR 600 applies because my business is managed in New York. Please provide the required standardized disclosure.”
MCA Guide is an independent matching service, not a lender or law firm. This article is general information, not legal advice. For guidance specific to your situation, consult a licensed attorney.
Related reading: New York MCA Guide · What Happens If You Default on an MCA · How to Get Out of a Bad MCA Deal · How MCAs Work