Editor’s Note: This article originally appeared in Leasing News on May 12, 2025 and is reprinted with permission.
Maybe, but only for merchant cash advances. This is not the first time Texas has flirted with disclosures in the MCA space. It failed in 2023, so it’s difficult to predict its fate this time around.
Two bills are pending, one in the Senate and one in the House (see below), but they are identical. If either bill passes, here is what it would look like:
- Only applies to sales-based financing, aka merchant cash advances, above $500,000 to a “recipient in this state.” Query: Does this mean an individual residing in Texas, a business entity domiciled there, or any person or company who happens to be in Texas when they receive the cash advance?
- Exemptions:
- Banks (specifically including out-of-state banks) and their subsidiaries and affiliates would be exempt, tossing yet another gauntlet at California!
- Certain tech services companies that provide tech services to exempt entities
- Lenders regulated under the Farm Credit Act
- Real property secured sales-based financing
- True (operating) leases
- Purchase money security obligations
- Vehicle dealers or motor vehicle rental companies, if the transaction is more than $50,000
- Sales-based financing offered by manufacturers, licensees, or distributors
- Makes usury applicable to these types of transactions (even though technically they are sales).
- Disclosures include:
- Total amount of financing,
- Disbursement amount
- Finance charge
- Total repayment
- estimated length of repayment period
- Payment amounts
- A few other items
- The recipient must sign disclosures before funding.
- Registration is mandatory for brokers of this type of financial product.
- Penalties can be $10,000 per violation and up to $100,000 in the aggregate.
Clearly, this skeletal framework would require regulations. As it stands today, MCA providers will have a tough time complying.
Senate Bill: https://capitol.texas.gov/tlodocs/89R/billtext/html/SB02677I.htm
House Bill: https://capitol.texas.gov/tlodocs/89R/billtext/html/HB00700I.htm
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