The Greene Room
As state disclosure mandates and federal reporting rules blur the lines between business lending and consumer protection, the equipment finance industry faces a shifting regulatory landscape that threatens speed, flexibility, and capital access.
In 1980, when I began my career as an attorney representing the equipment finance industry, I was not alone in believing that it felt like the wild, wild West. Commercial finance rested on a fairly simple laissez-faire premise: businesses were expected to look after themselves. A company borrowing money or leasing equipment was presumed to understand the transaction, negotiate the terms and live with the bargain it made. Consumer protections belonged on the other side of the fence.
That fence is becoming increasingly difficult to find.
Commercial finance is undergoing what might be called “consumerization.” There is still a separate body of law governing business-purpose transactions, but lawmakers and regulators are increasingly borrowing concepts from consumer finance—such as standardized disclosures, annualized rates, fair-lending data collection, broker regulation and greater scrutiny of sales practices—and applying them to small-business financing.
California’s commercial financing disclosure law is a perfect example. Providers of certain commercial financing must give recipients detailed disclosures before consummation, including the amount of funds provided, finance charges, payment information, and an annual percentage rate. New York followed suit with its own extensive disclosure regime for commercial financing up to $2.5 million. Other states have jumped on the bandwagon, although, much to the consternation of the money providers, they have not all chosen the same rules, forms, calculations, exemptions, or terminology. Uniformity would apparently have made things too easy.
The theory behind these laws is not difficult to understand. Many small-business owners are experts at running restaurants, construction companies, medical practices, or transportation businesses. That does not necessarily make them experts at comparing a term loan, equipment lease, factoring arrangement, and sales-based financing product. If different products describe their costs in entirely different ways, comparison becomes difficult. That is the natural byproduct of an industry offering a plethora of financial products.
Transparency is a legitimate objective. A financing company should accurately describe the product it is selling, the amount the business will receive, the amount it must repay and the consequences of default. Even the wild west had basic common sense rules.
But disclosure laws also reveal the central problem with consumerizing commercial finance. An annual percentage rate was designed primarily for consumer credit. Applying an APR-like calculation to transactions with variable remittances, uncertain durations or reconciliation rights may produce a number that looks precise while conveying something less than precision. Providers may be giving business owners more information without necessarily giving them more understanding.
The trend extends beyond disclosures. Section 1071 of the Dodd-Frank Act requires covered financial institutions to collect and report information about applications for small-business credit. The CFPB substantially narrowed its implementing rule in May 2026 and postponed compliance until January 1, 2028, but the underlying principle remains; business credit has become part of the federal fair-lending data structure.
Regulators have also focused on merchant cash advances and other sales-based financing products. The Federal Trade Commission has brought enforcement actions involving misleading promises, undisclosed personal guarantees, unauthorized withdrawals, and abusive collection practices. Those cases involved commercial transactions, but the regulatory language often sounds distinctly consumer-oriented: vulnerable customers, confusing terms, aggressive sales tactics and unequal bargaining power.
Some of that scrutiny was earned. Bad actors have a remarkable ability to inspire regulation for everyone else. That is why we have to take our shoes off every time we board a flight. But there is a danger in treating all small-business borrowers as consumers simply because some need protection.
A business owner seeking capital is making a business decision. The owner may use the money to acquire equipment, hire employees, purchase inventory, or survive a temporary cash-flow crisis. Speed, flexibility and certainty may matter more than the lowest theoretical annualized cost. A transaction that appears expensive when reduced to an APR may nevertheless be rational if it enables a business to accept a profitable contract or replace equipment that has suddenly decided retirement looks attractive at a time when it is needed. In other words, business borrowers are motivated by considerations quite different from those motivating consumer borrowers. The regulatory framework does not always seem to acknowledge those differences.
Additional regulation also has a cost. Every disclosure form, calculation methodology, registration requirement, and data-reporting obligation requires systems, lawyers, compliance personnel, and training. Those expenses do not disappear. They are reflected in pricing, reduced product availability or a lender’s decision that smaller transactions are no longer worth making. Rules intended to protect small businesses can therefore make it harder for those same businesses to obtain financing. Sometimes even the name “Department of Financial Protection and Innovation” gives me pause. Financial protection should not be measured solely by the restrictions imposed on providers; it should also account for whether businesses can still obtain the capital they need.
The answer is not to abandon regulation. It is to regulate commercial finance as commercial finance. Clear disclosure of material terms is sensible. Enforcement against deception, unauthorized debits and abusive collection conduct is necessary. Fair access to capital is a legitimate public concern. But none of those goals requires pretending that every business borrower is a helpless consumer or that every finance company is waiting behind a potted plant with a blackjack.
Commercial finance is not consumer credit. At least, it did not used to be. The distinction still matters, but regulators are steadily narrowing it. The industry should participate in that conversation before the fence disappears entirely—and everyone wakes up on the consumer side.
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