Texas HB 700 Takes Effect Today: What Small Business Funders Need to Know
- Staff Writer
- 3 minutes ago
- 2 min read
As of September 1, 2025, Texas HB 700 officially reshapes the commercial funding environment in the state. This landmark legislation introduces significant regulatory requirements for merchant cash advance (MCA) and revenue-based financing—also known as commercial sales-based financing (CSBF).
What’s Now in Effect
Providers and brokers of CSBF (funding repaid via a percentage of sales or revenue) must now adhere to strict disclosure standards. These include:
Total financing amount
Disbursement amount
Finance charge and total repayment amount
Estimated payoff timeline and payment schedule
Additional fees, collateral requirements, and broker compensation
Contracts cannot contain confession-of-judgment clauses or similar provisions, rendering them void and unenforceable under this law.
Crucially, automatic ACH debits from merchant accounts are now prohibited—unless the provider holds a first-priority perfected security interest in the account, a requirement nearly impossible to meet under current UCC norms.
What’s Coming — Future Milestones
Registration Mandate: Providers and brokers must register with the Texas Office of Consumer Credit Commissioner. This requirement takes effect December 31, 2026.
Rulemaking Timeline: By September 1, 2026, the Finance Commission of Texas must adopt enforcement rules and disclosures, while the OCCC must establish registration forms and fees.
Industry Response: What Funders Are Doing
With the new law in force, funders are reacting swiftly:
Banks and loan providers that don’t rely on sales-based repayment models remain unaffected and may start positioning themselves as compliant alternatives.
Fintech platforms are proactively reaching out to Texas borrowers, offering to refinance existing MCAs into more compliant products to prevent disruption.
Across the funding ecosystem, there’s a growing shift toward traditional term loans or other models not falling under CSBF classification, ensuring continuity of capital flow for Texas businesses.
Why It Matters
HB 700 was brought forward supposedly to enhance transparency, curb unfair practices, and protect Texas small businesses from opaque financing deals. But it was pushed by a Texas billionaire who's connected to a factoring company, and with the American Factoring Association, their goal was to reduce competition in the state for factoring products. Additionally, it also places real constraints on how quickly and flexibly fintech funders can deploy capital—forcing industry adaptation in real time.
As the law’s framework unfolds over the next 12–15 months, staying informed and compliant will be paramount for funders, brokers, and referral partners.
