The commercial finance industry is at a pivotal juncture, with the sector undergoing significant regulatory changes. These changes have begun to reshape conventional business practices. Some businesses have chosen to abstain from funding in specific states, while others have embraced the challenge head-on, ensuring full compliance across the board.
We have already witnessed the enactment of commercial financing disclosure laws in various states. The most recent addition is Georgia, with Florida on the cusp of joining, provided there are no unexpected obstacles. Numerous other states are currently deliberating similar bills in their respective legislative bodies.
One organization at the forefront of these regulatory changes is the Revenue-Based Finance Coalition (RBFC). Their role in shaping sensible legislation and counteracting detrimental laws has been crucial. The RBFC continues to wield significant influence over existing laws while dedicating resources to prospective legislation.
We are presently witnessing a transformation that has been anticipated within the alternative business lending industry for many years. While now it's classified under commercial finance, the product often known as 'merchant cash advance' carries diverse names in state laws - such as sales-based or revenue-based financing. Assuming the current trajectory continues, companies in this industry will operate quite differently five years from now.
It's worth noting that the potential advantages should surpass the disadvantages. Companies with a long-term outlook will adapt accordingly, while those driven by short-term gains may eventually find themselves struggling to keep pace.
One essential aspect that both funders and brokers need to prepare for is the heightened emphasis on compliance. As more states establish unique laws - say, 20 or more - keeping abreast of varying requirements will be a daunting task. This scenario will inevitably raise the barriers to entry and increase operational costs for existing funding companies and Independent Sales Organizations (ISOs).
In essence, now is the time for action. It's imperative that you make adequate financial and operational preparations for these changes if you haven't done so already.