Vermont is one of a growing number of states that has imposed strict licensing and disclosure requirements on commercial finance providers and brokers. Recently, on June 16, 2026, Governor Phil Scott signed House Bill 648, expanding the reach of those laws to sales-based financing (aka merchant cash advances or MCA’s) and factoring transactions. The new bill created one of the most comprehensive regulatory frameworks for commercial financing transactions in the country. The new rules also reflect a nationwide trend toward increased oversight of small-business financing and “specialty” finance products like merchant cash advances and factoring.
The legislation becomes effective on July 1, 2027 and applies primarily to sales-based financing transactions, including merchant cash advances and revenue-based financing, as well as factoring arrangements involving Vermont businesses. Under the law, commercial finance providers offering these types of transactions under specified thresholds must comply with licensing, disclosure and conduct requirements administered by the Vermont Department of Financial Regulation.
One of the most significant changes is the creation of licensing requirements for both providers and brokers. Vermont law already requires that companies engaged in making “covered” commercial financing transactions obtain a Vermont lender license. Beyond that, brokers, lead generators and other parties involved in soliciting or arranging such financing may be required to obtain a loan solicitation license. Vermont’s new licensing framework expands upon its existing lender licensing requirements and extends regulatory oversight to participants throughout a much broader commercial finance marketplace.
The law also introduces extensive disclosure obligations designed to provide small-business borrowers with greater transparency regarding financing costs. Most notably, providers must disclose the annual percentage rate (APR) using a methodology comparable to that used under the federal Truth in Lending Act. This requirement is intended to allow business borrowers to compare financing products more easily and to better understand the true cost of capital. Vermont joins states such as California, New York, Utah and Virginia in requiring commercial financing disclosures that resemble consumer lending disclosures.
In addition to disclosure requirements, the legislation imposes operational restrictions on providers. As in Texas, the Vermont law restricts the use of automatic ACH debits unless the provider possesses a properly perfected first-priority security interest in the borrower’s deposit account. This provision could significantly affect traditional MCA repayment structures and may limit the ability of multiple funders to maintain competing repayment rights against the same business account.
The new statute also prohibits the use of confessions of judgment in covered transactions and requires that Vermont law govern disputes involving Vermont borrowers. These provisions are intended to provide additional protections to small businesses and ensure that disputes are resolved under Vermont’s regulatory framework rather than in distant jurisdictions.
Commercial finance companies, factors and brokers that serve Vermont businesses should begin reviewing their licensing status, disclosure procedures, underwriting practices and contract forms well before the July 2027 effective date. Given the law’s broad scope and substantial penalties for noncompliance, Vermont has established itself as a leading state in the regulation of commercial financing transactions and may serve as a model for future legislation in other jurisdictions.
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