Revenue based financing for Texas businesses
Merchant cash advance in Texas
Texas passed one of the strictest merchant cash advance laws in the country. It requires signed disclosures, limits automatic debits, voids confessions of judgment, and requires funders and brokers to register by December 31, 2026. Here is what it means for your Texas business.
How merchant cash advances work in Texas
A merchant cash advance works the same way in Texas as anywhere else: a funder buys a share of your future sales for a lump sum today. What changes by state is what the funder must tell you before you sign.
You receive funding up front and repay a fixed total amount through daily or weekly debits, or a percentage of card sales. Because an MCA is usually structured as a purchase of receivables rather than a loan, it is priced with a factor rate instead of an interest rate. See how factor rates and total cost work.
Texas is one of a growing number of states with its own commercial financing law. Knowing what that law requires helps you read an offer, spot missing information, and compare funders on equal terms.
Texas rules for merchant cash advances
| Rule | What it means for you |
|---|---|
| Law | Texas Finance Code Chapter 398, commercial sales-based financing (HB 700, 2025), with OCCC rules at 7 Texas Administrative Code Chapter 86 |
| Who it covers | Providers and brokers of commercial sales-based financing, such as merchant cash advances, including those serving Texas businesses online |
| Amount covered | Disclosures apply to specific offers of less than $1 million |
| Common exemptions | Banks, credit unions and their affiliates, transactions secured by real property, and leases |
| Effective | The law took effect September 1, 2025; registration is required by December 31, 2026 for businesses already operating |
| Enforcement | Office of Consumer Credit Commissioner; civil penalty of $10,000 per violation; no private right of action |
Summary for general information; see HB 700 and the OCCC page in the sources below for exact requirements.
What your offer must show you
Texas disclosures must show:
- The total amount of financing and the disbursement amount
- The finance charge and the total repayment amount
- The estimated time for payments to equal the total repayment
- The payment amounts and frequency, or for variable payments, the calculation method and average projected monthly payment
- Other fees, such as draw, late, or returned-payment fees
- Any finance charge or fees due on early payoff or refinancing
- Any collateral requirements or security interests
- Whether the provider pays a broker, and how much
The disclosure must also show how much of the new financing goes to prepayment charges and unpaid finance charges, and how much that reduces the amount you receive.
How to use the disclosure to compare offers
Texas disclosures do not require an APR, so compare the amount you will receive, the finance charge, the total repayment, and how long repayment is expected to take. Also ask how payments will be collected, given the automatic debit rules.
| Disclosure line | Hypothetical offer |
|---|---|
| Funding amount (total financing) | $50,000 |
| Fee withheld at funding | $1,500 |
| Amount actually deposited (disbursement) | $48,500 |
| Total repayment (1.30 factor) | $65,000 |
| Payments | About $344 per business day for about 9 months |
| Finance charge | $16,500 |
| Estimated APR (not required in Texas) | About 82% at this pace |
Hypothetical example for illustration only, not an offer.
Convert any Texas offer to an estimated APR with the MCA calculator, and review how to compare MCA lenders.
Automatic debits, registration, and confessions of judgment
Texas goes further than disclosure. These rules can change how an MCA is repaid.
- Automatic debit limits: a provider or broker may not set up automatic debits from your deposit account unless it holds a perfected security interest in that account with first priority. Many MCAs are repaid by daily automatic debits, so ask how repayment will work under Texas law.
- Registration: providers and brokers must register with the Texas Office of Consumer Credit Commissioner (OCCC). Businesses already operating must register by December 31, 2026, and new entrants before doing business in Texas. Ask any funder or broker whether it is registered.
- Confessions of judgment: a contract provision containing a confession of judgment is void and unenforceable.
- Broker compensation: the disclosure must say whether the provider pays a broker, and how much.
- Signed disclosures: you must sign the disclosure before the application is finalized.
Typical MCA requirements for Texas businesses
State law sets disclosure rules, not approval rules. Funders weigh the same factors everywhere.
- Time in business: often 6+ months; some programs review from 3 to 4 months
- Monthly deposits: often $10,000+ in true business revenue
- Bank activity: regular deposits and few or no negative days or returned items
- Existing advances: disclosed, and not already taking a large share of deposits
- Credit: mid-600 profiles commonly considered; some files below 600 reviewed
Typical ranges, not promises; each funder sets its own minimums. See the full MCA requirements checklist and the document checklist.
Related guides and tools
Frequently asked questions
Q01What did Texas HB 700 change for merchant cash advances?
It created Texas Finance Code Chapter 398 for commercial sales-based financing. It requires signed disclosures for offers under $1 million, limits automatic debits from your deposit account, voids confessions of judgment, requires broker compensation to be disclosed, and requires providers and brokers to register with the OCCC.
Q02When do MCA funders have to register in Texas?
Businesses already acting as providers or brokers when the law took effect must register with the Office of Consumer Credit Commissioner by December 31, 2026. New entrants must register before doing business in Texas.
Q03Can an MCA funder automatically debit my account in Texas?
Only if it holds a perfected security interest in your deposit account with first priority. Ask any funder how repayment will be collected under Texas law before you sign.
Q04Are confessions of judgment allowed in Texas MCA contracts?
No. Under Chapter 398, a contract provision containing a confession of judgment or similar provision is void and unenforceable.
Q05Do Texas MCA disclosures include an APR?
No. Texas requires the finance charge, total repayment, estimated term, payment details, and fees, but not an APR. You can estimate one with an MCA calculator.
Q06Is SmallByzLoans a lender?
No. SmallByzLoans is a funding marketplace. We match you with funding providers, and the provider makes the decision and provides the required disclosures.
Sources and further reading
- HB 700 (89th Legislature), enrolled bill text, Texas Legislature Online
- Commercial Sales-Based Finance registration, Texas Office of Consumer Credit Commissioner
- Business guidance for small businesses, Federal Trade Commission
Financial disclaimer: This page is general information about Texas law as of October 2026, not legal, financial, or tax advice. Laws and regulations change; confirm current requirements with the regulator or an attorney. SmallByzLoans is a funding marketplace, not a lender. Approval, amounts, and terms are set by each funding provider.
Compare MCA offers for your Texas business
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