In a move aimed at fostering transparency in business-to-business transactions, both Georgia and Florida have passed laws mandating disclosure in commercial financing agreements. These new regulations necessitate that certain commercial financing providers present disclosure statements as a part of their operations. Georgia and Florida now join the increasing list of U.S states implementing such measures. More details can be found at JD Supra.
These new legislations prompt several important questions related to their applicability and the specifics of the required disclosures. The immediate applicability of the laws is primarily directed at commercial financing providers involved in business-to-business transactions within these states.
- Georgia’s law, HB 509, covers transactions that involve businesses obtaining commercial financing of $500,000 or less. The required disclosures need to be provided in writing by commercial financing providers before the consummation of the transaction. The disclosures must be explicit and include details such as the amount of financing, finance charges, Annual Percentage Rate (APR), repayment terms, and any prepayment costs.
- Florida’s law takes a marginally different approach from Georgia. Florida SB 1860 seeks to regulate merchant cash advances, sales-based financing, and other non-loan transactions, beyond conventional commercial loans. Akin to the Georgia law, commercial financing providers in Florida are, also, required to furnish clear and concise disclosures in their business-to-business transactions. However, the specifics of what has to be disclosed under this law are yet to be defined by regulatory agencies.
As more details unveil, legal and financial professionals will need to remain vigilant to adjust to these changing legislations and their subsequent rules.