Eight states’ disclosure laws (one effective in 2027) cover accounts receivable purchases. Four more reach only sales-based financing.
By David J. Jencks
A growing number of states require providers of commercial financing to give APR-style disclosures before closing. The question for factors is whether a given state’s law reaches the purchase of accounts receivable, or only sales-based (merchant cash advance-style) products. Here is where things stood as of July 2026.
Eight states have disclosure laws that reach accounts receivable purchases: California, New York, Florida, Georgia, Kansas, Missouri, Utah and Vermont (effective July 1, 2027). Thresholds, exemptions and registration requirements differ from state to state.
States limited to sales-based or revenue-based financing
Connecticut (≤ $250,000), Virginia (≤ $500,000, with provider and broker registration), Texas (≤ $1 million; Finance Code Chapter 398, HB 700) and Louisiana (revenue-based financing, no dollar threshold). These generally do not cover traditional factoring of specific existing invoices.
Practical notes
- Product design matters. A pure purchase of specific existing receivables is clearly covered in the A/R-purchase states. A product with a true-up or reconciliation based on overall sales or revenue may also trigger the narrower sales-based laws.
- Check the exemptions. Banks and affiliates are usually exempt, and real-property-secured deals, true leases, certain purchase-money transactions and low-volume providers (five or fewer transactions in 12 months) are frequently carved out.
- Registration is spreading. Utah, New York, California-related licensing and, going forward, Vermont have registration or licensing requirements.
- Keep watching. More states are considering legislation, and definitions and thresholds change through regulation and amendment. Evaluate each state’s definition, the recipient’s location, transaction size and your activity volume.
This summary is for informational purposes only and is not legal advice. Review each state’s statutory definitions, thresholds and exemptions for your specific product structure.
This post is general information, not legal advice, and does not create an attorney-client relationship.
