Where We Are Currently
Also known as House Bill 1027, Virginia’s commercial disclosure law is narrowly focused on regulating sales-based financing—specifically, merchant cash advances for less than $500,000. Providers must register with the Virginia State Corporation Commission, ensure up-front disclosures about financing terms, and follow specific dispute-resolution procedures.
How We Got here
Introduced by delegate Kathy Tran, the Bill was first read and then passed by both the House and Senate between February and March 2022. It was then signed into law by Governor Glenn Youngkin on April 11, 2022. The law went into effect on July 1, 2022.
What Funders Need to Know
Subject
The Virginia law applies to providers of sales-based financing (i.e., merchant cash advances), including sales-based financing brokers.
Exemptions
The law does not apply to providers who make five or less MCA transactions in any 12-month period, nor to financial institutions such as banks or credit unions. Merchant cash advances over $500,000 in value are also exempted.
Compliance Requirement
All MCA providers (including sales-based financing brokers) must register with the Virginia State Corporation Commission on an annual basis.
Disclosure Requirements
Providers are required to disclose 9 specific terms at the time of offering an MCA to a merchant. These disclosures resemble those required for sales-based financing providers under other recent state laws. The Virginia law does not require APR disclosure.
Other Rules
Virginia’s law also includes rules for settling disagreements between funders and borrowers. If a borrower decides to take legal action, such activity must occur within the state.
The law also limits how companies can use arbitration to solve problems. For example, funders must pay all arbitration costs, and cannot make borrowers travel far away to receive arbitration.
Penalties
No penalties are stipulated in the law.
