Are Merchant Cash Advances Legal in All States? A 2025 Legal Breakdown

Merchant Cash Advances (MCAs) offer fast capital to small businesses by selling future receivables to a funder. While marketed as “not a loan,” their legality varies by state—and in 2025, the legal landscape is changing fast.

Several states now regulate MCAs with new rules on disclosures, registration, and interest classification. Texas, for example, introduced bills in May 2025 that would define MCA fees as “interest” and apply lending laws. Virginia, Utah, New York, and California already enforce strict rules requiring clear cost breakdowns and provider registration. Illinois has similar legislation pending.

Why the concern? Some MCA providers still use confession of judgment (COJ) clauses to seize assets without warning or stack daily withdrawals that cripple cash flow. In January 2025, one company settled for $1 billion after charging over 800% APR.

How to Protect Your Business

• Ask for a full payback total, factor rate, and estimated APR—especially in unregulated states.

• Refuse to sign any contract with a COJ clause.

• Check your provider’s registration status online in states like NY, CA, UT, and VA.

• Run cash flow scenarios to avoid overextension.

• Consult an attorney before signing or restructuring existing MCAs.

In short, MCAs are legal in most states, but the rules differ—and more changes are coming. If you face high fees or stacked advances, explore your options with a qualified advisor. To help manage your obligations, consider Merchant Cash Advance Settlement strategies that protect your business.

Read the full blog - Are Merchant Cash Advances Legal in All States? A 2025 Legal Breakdown