Category · Regulatory
State commercial-financing disclosure rules, mid-2026 update
California, New York, Utah, and Virginia have active disclosure regimes. Georgia and Connecticut are next. What changes for MCAs and ISOs.
Key takeaways
- Four states have active commercial-financing disclosure regimes in 2026: California, New York, Utah, and Virginia. Georgia and Connecticut are next, on staggered timelines.
- Each regime requires disclosure of total cost of capital, estimated APR or equivalent, and prepayment terms in a standardized format.
- MCA funders that fund based on inflated revenue figures are increasingly exposed: a defensible underwriting record matters more under disclosure than it did before.
- ISOs that broker into multiple states need to track which disclosure regime applies to each transaction.
- Vyaso's adjusted-revenue figure is the kind of artifact that holds up if underwriting decisions are reviewed by counsel or by a state regulator.
Why this matters in 2026
State commercial-financing disclosure rules are no longer novel. California's Senate Bill 1235 took effect in December 2022, and the framework has been live for years. New York's Commercial Financing Disclosure Law followed in August 2023. Utah and Virginia activated their regimes in 2023 and 2024 respectively. Georgia and Connecticut are next. [Industry estimate¹]
What is new in mid-2026 is enforcement posture. State regulators have moved past the initial education period. Funders that fund without compliant disclosure now face meaningful fines and rescission claims. ISOs that broker non-compliant transactions are pulled in alongside the funder.
What each regime requires
The four active regimes share a common spine, with state-specific differences:
- Total cost of capital, in dollars and as an annualized percentage rate or equivalent metric.
- Term, prepayment penalty structure, and any holdback arrangement.
- The factor rate or equivalent for MCA structures.
- Standardized disclosure language at the time of contract.
California's disclosure form is the most prescriptive. New York's is the broadest in scope. Utah's adopts the New York approach with state-specific carveouts. Virginia's follows California more closely. ISOs operating across states need separate disclosure templates for each regime.
What changes for MCA underwriting
Disclosure requires a defensible number. A funder disclosing a 1.49 factor rate against an inflated monthly-revenue figure is now exposed in a way it was not before disclosure existed.
The adjusted-revenue figure underwriters used to produce internally is now part of the regulatory paper trail. If a merchant defaults and counsel reviews the file, the underwriting record is reviewed alongside the disclosure. Two outcomes matter:
- The underwriting figure should be reproducible. Two analysts running the same statement should land on the same number.
- The underwriting figure should be conservative. A figure that includes lender deposits, kiting, or daisy-chain inflation is hard to defend if the file is reviewed after the fact.
This is not a hypothetical concern. Several funders have faced regulator inquiries in 2025 and early 2026 where the question was not whether disclosure happened, but whether the underwriting that supported the disclosed terms was defensible. [Industry estimate¹]
What changes for ISOs
ISOs face two compliance fronts. First, the brokerage itself must comply with state-specific disclosure timing and content. Second, the merchants ISOs route to funders must be supported by underwriting that the receiving funder can disclose against without exposure.
The second front is where adjusted revenue matters. ISOs that submit on gross deposits are routinely matched with funders that decline at the underwriting step. Under disclosure, the cost of submission to the wrong funder is not just cycle time. It is also the risk that a partial disclosure, generated and then walked back, becomes an audit point.
Pre-screening with the same intelligence the funder uses internally avoids this category of problem.
What is on the horizon
The 2026 regulatory direction is unambiguous. More states will enact disclosure regimes. The CFPB's 1071 rule, while focused on data collection rather than disclosure, raises the broader compliance baseline for commercial financing. Federal-level disclosure legislation has been introduced multiple times in the last three sessions and may pass in 2027. [Industry estimate¹]
The funders that will navigate this well are the funders whose underwriting records hold up. The ones that will struggle are the ones funding against gross deposits and hoping the regulatory eye does not land on them.
This is not legal advice. Compliance regimes vary by state and change frequently. Confirm specifics with counsel licensed in the relevant jurisdiction.
The funders that will navigate this well are the funders whose underwriting records hold up. The ones that will struggle are the ones funding against gross deposits and hoping the regulatory eye does not land on them.