On March 1, Senate Bill (SB) 335 was introduced, which, if passed, would impose certain requirements on “commercial financing transactions.” Recently, multiple states have enacted disclosure regulations for commercial financing transactions (see discussions on California, Connecticut, Florida, Georgia, New York, Virginia, and Utah).

Under SB 335 a “commercial financing transaction” is defined as a business purpose transaction under which a person extends a business a commercial loan, an account receivable purchase transaction, or a commercial open-end credit plan.

The bill attempts to mitigate recharacterization risk for account receivable purchase transactions by stating that the provider’s characterization of a transaction as an accounts receivable purchase transaction is “conclusive” that the transaction is not a loan.

Scope of SB 335

The bill defines a provider as a person who consummates more than five commercial financing transactions in the state during any calendar year. A provider also includes “a person who enters into a written agreement with a depository institution to arrange a commercial financing transaction between the depository institution and a business via an online lending platform administered by the person.”

SB 335 has exemptions for federally insured financial institutions, providers with no more than five commercial financing transactions in 12 months, commercial financing transactions secured by real estate, commercial financing transactions of more than $50,000 to motor vehicle dealers, and commercial financing transactions of more than $500,000.

Disclosure Requirements

SB 335 requires disclosure of the following:

  • The total amount of financing provided to the business under the terms of the commercial financing transaction;
  • The net amount of funds disbursed directly to the business;
  • The total amount paid to the provider;
  • The total dollar cost of the commercial financing transaction, calculated by finding the difference between the total amount of funds provided and the total amount paid by the provider;
  • The manner, frequency, and amount of each payment. If the payment is variable, the manner, frequency, and estimated amount of the initial payment, and a description of the methodology for calculating any variable payment; and
  • A statement of whether there are any costs or discounts associated with prepayment.

Broker Requirements and Restrictions

Under SB 335, a broker means a person who, for compensation, arranges a commercial financing transaction or an offer between a third party and a business in the state.

The law would prohibit any broker from assessing or soliciting an advance fee from a business to provide services as a broker. This would not prohibit a broker from soliciting a potential business to pay for actual services necessary to apply for a commercial financing transaction, including, credit checks or appraisals, where such payment is made by check or money order payable to an independent third-party.

SB 335 further prohibits brokers from making false or deceptive representations in their business dealings and from offering services in any advertisement without disclosing the actual address and telephone number of the broker.


The bill provides that the Attorney General may receive and act on complaints received under the section. The Act further provides for monetary penalties. No private right of action exists under the bill. And, further, a violation of the law would not affect the validity of the underlying commercial financing transaction.

The proposed law would apply to any commercial financing transaction consummated on or after January 1, 2025.