Louisiana Now Requires Disclosures for Revenue-Based Financing Transactions

Effective August 1, 2025, Louisiana will subject revenue-based financing transactions to new disclosure requirements, joining the still-growing ranks of states passing commercial finance disclosure laws in recent years. But unlike other states’ laws, Louisiana House Bill 470, enacted on June 8, is devoid of “outs” for providers hoping to avoid the law’s application. The law does not exempt any types of entities, nor does it include a maximum dollar amount above which the law does not apply, making it one-of-a-kind among the laws of its type enacted to date.

Like Texas’s own recently enacted sales-based financing disclosure law, the Louisiana law applies only to financing that can be characterized as a merchant cash advance (“MCA”), and excludes credit transactions such as loans. HB 470 applies to "revenue-based financing transactions," defined as “an agreement under which a person engaged in a commercial enterprise sells or agrees to forward a percentage of sales, revenue, or income, and the person's payment obligation increases and decreases according to the volume of sales made or revenue or income received.”

Compared to some other states’ laws, the Louisiana law is favorable to the industry in certain respects. For example, HB 470 does not require providers of commercial financing to register with the state; does not impose restrictions on automatic debits; requires disclosures to be made in relatively simple form that does not require disclosure of an APR; and contains a presumption that revenue-based financing transactions are not regulated as credit products or subject to Louisiana’s statutory interest rate limitations. The lack of exemptions is where HB 470 differs from other state laws.

The state commercial finance disclosure laws enacted thus far by other states each contain a number of exemptions for certain companies and transactions. For example, other states commonly provide exemptions for: depository institutions, and in some cases subsidiaries thereof; licensed money transmitters; providers making no more than a small number of transactions in a set period; and transactions in amounts exceeding a certain dollar amount, ranging from $250,000 to $2.5 million, depending on the state.

With its absence of exemptions, Louisiana’s is the first commercial finance disclosure law that does not exempt any banks or other depository institutions. It is also the first law with no dollar amount maximum to limit the law’s scope to small business financing. Because the law is limited to revenue-based financing transactions, the absence of an exemption for insured depository institutions and their affiliates is not a significant concern.

Although the bill as it was originally introduced did not impose disclosure requirements, amendments adopted in early June, and enacted with the final legislation, require a revenue-based financing transaction to “include” a written disclosure of the following terms:

• The total amount of funds provided to the commercial enterprise under the terms of the agreement;
• The total amount of funds disbursed to the commercial enterprise if less than the amount specified above (as a result of any fees deducted or withheld at disbursement, any amount paid to the provider to satisfy a prior balance, and any amount paid to a third party);
• The total amount to be paid to the provider under the terms of the agreement;
• The total dollar cost to the recipient under the terms of the agreement, calculated as the difference between the total funds provided and the total funds to be repaid;
• The manner, frequency, and amount of each payment; or if the amount of the payments vary, the manner and frequency of the payments, the estimated amount of the initial payment, a description of the methodology for calculating any variable payment, and the circumstances under which payments may vary; and
• Whether there are any costs or discounts associated with prepayment, including a reference to the provision in the transaction agreement that creates the contractual rights of the parties related to prepayment.

These disclosures closely mirror those required under a number of other states’ commercial finance disclosure laws. The disclosure is to be provided at or before the consummation of a transaction. Only one disclosure is required for each revenue-based financing transaction, and new disclosures need not be provided as a result of a modification, forbearance, or change to a consummated revenue-based financing transaction.

Because the operative disclosure requirements apply whenever a revenue-based financing transaction is consummated, without regard to the parties involved, it is not clear whether the disclosure requirements should apply to a broker as well as a provider. Because the law is ambivalent about which party provides the disclosures, it may best be interpreted as requiring merely that the recipient of financing receives the required disclosures from some party at or before consummation of the transaction, without regard to which party provides them.

As HB 470 does not authorize any administrative agency to promulgate rules to implement the law, providers of revenue-based financing in Louisiana will likely be responsible for designing their own disclosures. Louisiana disclosures were required beginning August 1, 2025.