On April 10, 2023, Georgia’s new commercial financing disclosure law approached the finish line as Senate Bill 90 hit Governor Brian Kemp’s desk with strong bi-partisan support, a mere two months after it was proposed. If the bill passes, as expected, Georgia will be the fifth state with mandatory disclosure laws, and the 15^th to have considered or passed such laws. Yes, there is a pattern here.

Here’s a link to the bill.

The Georgia legislation would go into effect on January 1, 2024. It applies to business loans of $500,000 or less, like California.

What transactions are exempt?

• True leases;
• Federally insured depository financial institutions;
• Subsidiaries, affiliates or holding companies of federally insured depository financial institutions (unlike California)
• Providers under the Farm Credit Act;
• Real estate secured commercial transactions;
• Purchase money obligations;
• Motor vehicle floor plan financing;
• Credit extended in connection with the sale of the creditor’s or the creditor’s parent company’s goods or services;
• Lenders making 5 or fewer commercial transactions in Georgia in any 12 month [N.B. The definition of “provider” refers to someone who does more than 5 transactions in a calendar year. This will need to be reconciled]; and
• Factoring, merchant cash advances owed to a healthcare provider because of a patient’s personal injury treated by the healthcare provider.

What needs to be disclosed?

• Total amount funded;
• Amount to be disbursed to borrower, if less than the amount funded (i.e. after payment to vendor);
• Amount that the borrower will be required to repay the lender;
• Total dollar cost to borrower;
• Manner, frequency and amount of each payment, or an estimate if the amount of the payment may vary;
• Statement re prepayment costs, with a reference to the section of the contract that creates those obligations; and
• Description of the methodology for calculating any variable payment amount including the circumstances which might give rise to the variation.

What is absent from the Georgia bill?

• Interest calculation;
• APR calculation (a welcome relief for many);
• Disclosure formats;
• There is no private right of action for violation of these laws. Only the Attorney General can pursue these claims.

What about brokers?

• Prohibits advance fees, with certain exceptions for hard costs i.e. credit checks; and
• Prohibits brokers from making false or misleading representations or omissions of material facts.

What else do you need to know?

• A violation of the disclosure laws does not affect the enforceability of the underlying transaction; and
• Penalties are $500 per violation not to exceed $20,000.

This article is presented by the Law Office of Kenneth Charles Greene. All copyrightable text, the selection, arrangement, and presentation of all materials (including information in the public domain), and the overall design of this presentation are the property of the Law Office of Kenneth Charles Greene. All rights reserved. Permission is granted to download and reprint materials from this article for the purpose of viewing, reading, and retaining for reference. Any other copying, distribution, retransmission, or modification of information or materials from this article, whether in electronic or hard copy form, without the express prior written permission of Kenneth C. Greene, is strictly prohibited. The materials available from this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to these materials does not create an attorney-client relationship between the Law Office of Kenneth Charles Greene and the user or viewer. The opinions expressed herein are the opinions of the individual author.