New York Merchant Cash Advance Laws: The Complete 2026 Guide to MCA Rules and Regulations

For years, New York State has been a significant market for the Merchant Cash Advance (MCA) industry. Because traditional bank financing may not be available to some small-to-medium-sized businesses (SMBs) due to credit requirements, collateral requirements, or other underwriting considerations, MCA funders can provide another source of access to capital.

While these alternative financing arrangements can serve an important function for businesses seeking capital, they are uniquely structured. Typically, MCAs are structured as a purchase of future receivables, rather than traditional loans. Historically, this structure has allowed MCAs to operate outside of certain traditional banking regulations, although applicable requirements may vary depending on the transaction and governing law. This different level of regulatory oversight has raised concerns about complex contract terms, assertive collection practices, and the cash flow challenges some businesses may experience with high-frequency payments.

However, the regulatory landscape of commercial financing in New York has been evolving. As we briefly touched on in our general Merchant Cash Advance Regulation Guide, New York has enacted commercial financing disclosure requirements that apply to certain sales-based financing transactions, while additional legislative proposals addressing commercial financing and MCAs have also been introduced. Businesses operating in New York may therefore encounter specific disclosure and regulatory requirements governing certain commercial financing transactions.

Here is a comprehensive overview of Merchant Cash Advance rules in New York, existing commercial financing disclosure requirements to know, and the proposed legislative developments on the horizon in 2026.

Coastal Debt Resolve is not a law firm, and these materials are provided for informational purposes only and do not constitute legal, financial, tax, or professional advice.

1. The New York Commercial Finance Disclosure Law (CFDL)

Before New York’s current disclosure requirements took effect in 2023, MCA funders commonly presented financing terms  using "factor rates" rather than Annual Percentage Rates (APRs). Because factor rates do not account for the timing of payments in the same way as an APR, it can be difficult for business owners to understand and compare the annualized cost of the capital they were considering.

To address this transparency gap, New York enacted the Commercial Finance Disclosure Law (CFDL), which became enforceable on August 1, 2023.

The CFDL requires covered commercial lenders and MCA funders providing certain financing of $2.5 million or less to present a standardized disclosure document to a potential recipient at the time a specific offer is extended. These requirements include certain consumer-style disclosures, including an estimated APR for covered sales-based financing for transactions.

For covered MCA and other sales-based financing transactions in New York, required disclosures may include:

• The Estimated Annual Percentage Rate (APR): MCA funders providing covered sales-based financing offers must disclose an estimated APR, expressed as a yearly rate and calculated in accordance with applicable requirements.
• The Finance Charge: The disclosure must identify the  finance charge associated with the transaction, including applicable fees required to be included under the governing rules.
• Broker Compensation: If a broker is involved in the MCA transaction, applicable regulations may require written disclosure regarding how and by whom the broker will be compensated.
• The Disbursement Amount: The disclosure must identify the amount actually disbursed to the recipient if it differs from the total financing amount because of fees deducted or withheld at disbursement.

Who Does the CFDL Apply To? The CFDL is targeted to certain commercial financing transactions in New York. It may apply when a covered recipient's business is principally directed or managed from New York, subject to the specific requirements and exemptions under the law. It also provides exemptions for certain traditional financial institutions, such as qualifying federally or state-chartered banks and credit unions.

2. Usury Caps vs. "True Sales" of Receivables

One of the most complex elements of New York Merchant Cash Advance law is how these transactions interact with the state's usury laws.

Under New York state law, charging more than 25% interest per year on certain loans or forbearances may constitute criminal usury. So, how can MCA transactions involve costs that, when expressed as an estimated annualized rate may exceed 100%?

The distinction generally centers on how the transaction is structured and operates. MCA funders typically structure the transaction as a "purchase of future receivables" rather than a loan. Because New York's strong usury laws generally apply to loans or forbearances, courts may look beyond the label of the agreement and examine how the transaction actually operates when determining whether it should be treated as a purchase of future receivables or as a loan.

To determine whether an MCA operates as a purchase of future receivables or as a loan, New York courts typically weigh the following three factors:

1. Reconciliation: Does the contract allow the merchant to reconcile or adjust its payment amounts if its actual business revenue or receivables change?
2. Finite Term: Is there a fixed timeline for repayment, or can the timeline vary based on the business's ability to generate future sales?
3. Recourse: If the business declares bankruptcy or otherwise fails to generate sufficient future receivables, what recourse does the agreement provide to the funder?

If a New York court determines that an MCA operates as a loan rather than a purchase of future receivables, the transaction may be subject to New York’s usury laws, including the potentially applicable 25% criminal usury cap. The potential consequences depend on the specific agreement, circumstances, and applicable law.

3. The 2025-2026 Legislative Push: Closing the Loophole

The legal distinction between a loan and a Merchant Cash Advance continues to receive attention in the New York State Legislature. Lawmakers have introduced bills during the 2025-2026 legislative session that propose expanding the reach of New York’s existing usury laws to additional financing arrangements, including certain MCAs.

Senate Bill S1726 (The End Loan Sharking Act) Introduced during the 2025-2026 legislative session, Senate Bill S1726 (dubbed "ELSA") proposes to extend New York's usury laws to a broader range of "financing arrangements," including Merchant Cash Advances. The bill would also broaden what may be counted as interest to include certain charges, fees, discounts and other amounts paid in connection with a covered financing arrangement. If enacted, the legislation could significantly change how New York’s  interest-rate limitations apply to certain MCA transactions in New York.

Senate Bill S10127 Similarly, Senate Bill S10127, introduced in 2026, proposes to extend New York's interest-rate caps and criminal usury framework to certain "covered services". The bill expressly includes Merchant Cash Advances, revenue-based financing, invoice financing, and other transactions that function as an advance of funds in exchange for a future payment or obligation.

While neither bill has been enacted into law at the time of this writing, their introduction signals that New York lawmakers continue to consider additional regulation of MCA pricing structures and other forms of commercial financing.

4. The End of the Confession of Judgment (COJ) for Out-of-State Debtors

No guide to New York Merchant Cash Advance rules would be complete without discussing the Confession of Judgment (COJ).

Historically, New York was a common venue for MCA funders because of its unique laws regarding COJs. A Confession of Judgment is a legal mechanism through which a debtor signs an affidavit admitting an amount owed and authorizing the entry of a judgment without the creditor first commencing a traditional lawsuit. For years, some MCA funders would require out-of-state business owners to sign New York COJs. If a business experienced a payment default,  a funder could file the COJ in New York and obtain a judgment without pursuing a traditional lawsuit, potentially leading to collection efforts involving the business's assets or accounts, even if the business was located in Texas or Florida.

In 2019, New York amended its laws to significantly restrict this practice. Today, a New York Confession of Judgment generally can no longer  be filed against an out-of-state debtor who lacks the required New York residency connection. Under the amended law, a COJ generally may be filed only in the New York county where the defendant resided when the affidavit was executed or where the defendant resides at the time of filing. 

This change significantly limited one of the more powerful and immediate collection tolls previously available to MCA funders dealing with out-of-state businesses. If an MCA funder seeks to pursue claims against a non-New York debtor, it may instead need to rely on other available contractual or legal remedies, depending on the agreement, jurisdiction, and individual circumstances.

Navigating MCA Debt with Coastal Debt Resolve

The regulatory environment for Merchant Cash Advances in New York continues to shift toward greater transparency and business protections . Laws like the CFDL provide covered businesses with additional information about the cost and terms of certain commercial financing offers before they are accepted, while restrictions on out-of-state COJs have significantly changed the collection landscape for business owners outside of New York.

However, transparency laws primarily address disclosures before you take the capital. If you are already dealing with a cycle of high-frequency daily MCA withdrawals that are negatively affecting your operating cash flow, understanding the regulatory landscape is just the first step. You may need a strategic plan for addressing your existing MCA obligations.

If your New York business (or a business managed from New York) is struggling with unmanageable MCA debt, commercial debt settlement may provide an effective path forward.

At Coastal Debt Resolve, our professional negotiators have experience with MCA agreements and the commercial financing landscape in New York Merchant. We work with you to pursue potential reductions in balances and revisions to high-frequency daily ACH withdrawals, with the goal of developing more manageable payment schedules based on your company's individual circumstances and creditor participation.

You do not have to navigate the complex world of commercial debt alone. Contact Coastal Debt Resolve today at (888) 707-7177 for a free, confidential consultation. Let our team review your MCA agreements and help your business regain operational stability.

DISCLAIMER: Coastal Debt Resolve is not a law firm and does not provide legal, financial, or professional advice. Services are provided exclusively to businesses, not consumer or personal debt relief. Results vary based on individual circumstances, creditor participation, and other relevant factors, and outcomes are not guaranteed.

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