Over the past few years, a major shift has taken place in the commercial finance industry—one that every factoring broker and commercial finance consultant must understand. It’s called the rise of Commercial Financing Disclosure Laws (CFDLs). These laws are transforming how financing transactions are presented, documented, and regulated across the United States. And while they are primarily aimed at lenders and funding providers, brokers must clearly understand where the lines are drawn—because crossing them can bring unexpected compliance exposure.
What Are CFDLs and Why Do They Exist?
CFDLs are state-level laws designed to bring consumer-style transparency into small business financing. In simple terms, they require certain financing providers to clearly disclose:
- Total funding provided
- Total repayment amount
- Total cost of financing
- Payment structure and frequency
- Prepayment terms
These disclosures must typically be provided before or at the time of closing the transaction. The intent is straightforward:
👉 Protect small business owners from unclear or misleading financing terms
👉 Standardize how financing costs are presented
👉 Increase transparency in alternative lending and factoring
The Growing List of CFDL States
This is not a single-state issue anymore. As of 2025–2026, at least 9–10 states have enacted CFDL laws, including:
- California
- Connecticut
- Florida
- Georgia
- Kansas
- Missouri
- New York
- Utah
- Virginia
- (Texas recently added disclosure requirements as well)
Additional states—such as New Jersey—are actively considering similar legislation. The key takeaway:
This is a national trend, not a regional one.
Two Types of CFDL States
Not all CFDLs are created equal. They fall into two general categories:
1. “Standard” CFDL States
These include:
- Florida
- Georgia
- Kansas
- Missouri
- Utah
These states generally follow similar rules and apply to:
- Commercial loans
- Lines of credit
- Factoring (accounts receivable purchase transactions)
2. “Non-Standard” CFDL States (More Complex)
These include:
- California
- New York
- Virginia
- Connecticut
These states often require:
- More detailed disclosures
- APR-style calculations
- Additional formatting requirements
These are typically more burdensome for providers and require more compliance infrastructure.
The Critical Definition: Who Is a “Provider”?
This is where brokers need to pay close attention. Under most CFDLs, a “provider” is generally defined as:
“Someone who consummates more than 5 commercial financing transactions in a 12-month period”
This is often referred to as the “5 transaction threshold.”
- 5 or fewer transactions → typically exempt
- 6+ transactions → subject to full disclosure requirements
Why This Matters for Factoring Brokers
Here’s the good news—and the part many brokers misunderstand:
👉 CFDL disclosure requirements apply to providers—not brokers
Most factoring brokers operate this way. They:
- Generate leads through marketing
- Explain the benefits of factoring to leads
- Connect the prospect with a factor or BDO
- Step out of the transaction
And that model is fully aligned with CFDL compliance
Where Brokers Can Get Into Trouble
While brokers are generally not responsible for disclosures, CFDLs do regulate broker behavior in important ways. In states like Florida, Georgia, and Kansas, brokers are specifically prohibited from:
- Charging upfront fees (with limited exceptions)
- Making false or misleading statements
- Omitting material facts
- Using deceptive marketing practices
Additionally, Florida requires brokers to clearly disclose:
- Their business address
- Their phone number
- Any forwarding service used in advertising
The Line You Must Not Cross
The biggest compliance risk for brokers is crossing the line into acting like a provider. You may be viewed as a provider if you:
- Quote specific rates or fees
- Structure the deal terms
- Present a binding financing offer
- Control or finalize the transaction
At that point, regulators may determine that you are no longer “just a broker” And if that happens:
- CFDL disclosure requirements apply to you
- Compliance obligations increase significantly
- You may face penalties for non-compliance
Your Safe Operating Model (Best Practice)
To stay compliant across all CFDL states, follow this model:
✔ Stay in the Consultant Role
- Educate the prospect in options
- Identify the prospect’s particular needs
- Position solutions
✔ Introduce the Funding Source
- Connect client to factor or lender
- Let the provider structure the deal
✔ Avoid Quoting Terms
- Do not present rates, fees, or repayment structures
- Do not issue financing offers
✔ Let the Provider Handle Disclosures
- This is their legal responsibility
- Not yours
Why This Model Is So Powerful
When done correctly, this approach allows brokers to:
- Operate in multiple states
- Avoid regulatory burden
- Scale their business
- Focus on relationship-building and referrals
In other words: You can build a large, multi-state consulting business without becoming a regulated financing provider
Compliance Is a Competitive Advantage
CFDLs are not something to fear—they are something to understand. Most brokers who struggle with compliance simply:
- Don’t know where the line is
- Or unintentionally cross it
But those who understand the structure gain a major advantage:
- They operate confidently
- They avoid legal exposure
- They position themselves as true professionals
CFDLs are expanding rapidly across the country, and they are here to stay. But for factoring brokers who:
- Stay in the consultant role
- Avoid structuring deals
- Let providers handle disclosures
There is no limitation on growth. Only opportunity.