Last year, Missouri State Senator Justin Brown (R) introduced a bill that would have imposed certain mandatory disclosure requirements for commercial financing transactions. Ultimately, the bill failed to advance. On December 1, 2022, Senator Brown reintroduced a similar bill, known as SB 187, which also requires registration of a commercial financing broker. The bill would also impose a list of mandatory disclosure requirements in commercial financing transactions but is more similar to Utah’s impending disclosure requirements discussed here, than the more stringent requirements imposed by California and New York (discussed here and here).
The bill states that a “provider” who consummates more than five commercial financing products to a business located in the state of Missouri in a calendar year would be required to make the following disclosures:
- The total amount of funds provided to the business under the terms of the commercial financing product;
- The total amount of funds disbursed to the business under the terms of the commercial financing product, if less than the total amount of funds provided, as a result of any fees deducted or withheld at disbursement and any amount paid to a third party on behalf of the business;
- The total amount to be paid to the provider pursuant to the commercial financing product agreement;
- The total dollar cost of the commercial financing product under the terms of the agreement, derived by subtracting the total amount of funds provided from the total of payments;
- The manner, frequency, and amount of each payment; and
- A statement of whether there are any costs or discounts associated with prepayment of the commercial financing product including a reference to the paragraph in the agreement that creates the contractual rights of the parties related to prepayment.
The bill defines commercial financing relatively broadly to include both traditional loans and lines of credit and accounts receivable purchase transactions but contains exceptions for certain financing “providers” such as banks and certain types of financing such as commercial mortgages. However, like the California and New York laws, certain bank partners may not be exempt because the definition of “provider” is broad and includes a “person that enters into a written agreement with a depository institution to arrange for the extension of a commercial financing product by the depository institution to a business via an online lending platform administered by the person.”
Unlike the California, New York, Virginia, and Utah commercial financing disclosures laws, the Missouri bill does not provide a general exemption for large-dollar commercial loans or lines of credit.
Troutman Pepper routinely assists clients in complying with commercial disclosure laws and will continue to monitor the developments in state and federal commercial finance regulation.