Here are the top issues that we are seeing for 2024:
- Regulatory Tides Are Rising
State and federal regulators have sharpened their focus on commercial financing practices, particularly in the MCA space. Several state-level agencies began drafting or enacting legislation requiring greater transparency and disclosure in commercial finance agreements. These measures are particularly aimed at protecting small businesses from hidden fees, unclear terms, and disguised interest rates.
New Jersey has reignited legislative efforts to mandate annual percentage rate (APR) disclosures for sales-based financing. If enacted, such laws could significantly increase compliance burdens and reshape how funders present their offerings.
Meanwhile, California’s Department of Financial Protection and Innovation (DFPI) began enforcing new regulations as of October 1, 2023. These rules prohibit unfair, deceptive, or abusive practices by commercial financing providers and require clear disclosures to small businesses, family farms, and nonprofits—marking one of the most comprehensive commercial finance frameworks in the country.
On the federal level, the Consumer Financial Protection Bureau (CFPB) clarified in 2023 that certain MCA arrangements may be considered “credit” under the Equal Credit Opportunity Act (ECOA), potentially making them subject to anti-discrimination and fair lending rules.
- Legal Challenges Are Gaining Traction
Over the past year, several high-profile lawsuits—brought by both public and private entities—have challenged the structure and enforceability of MCA agreements. Allegations range from usurious interest rates to improper use of confessions of judgment and deceptive marketing practices.
While these cases remain in various stages of litigation or settlement as of the start of the new year, they have already sent a clear signal: courts and regulators are more willing than ever to question whether MCAs truly function as sales of future receivables or if they are, in fact, disguised loans.
For funders and brokers, 2024 may bring new legal precedents and judicial interpretations that reshape how MCA contracts are written, enforced, and challenged.
- The Push for Standardization
One recurring theme in 2023 was the industry’s lack of standardization, something that creates confusion for borrowers and operational risk for funders. Several industry observers believe 2024 could mark the beginning of a consolidation or self-regulation phase. This may include the adoption of common contract structures, improved data-sharing between funders and underwriters, and clearer protocols for default and collection.
Some providers and trade associations are already lobbying for more consistent terminology and metrics (such as standardized ways to present estimated costs, factor rates, and payback schedules). These efforts aim to pre-empt more aggressive regulatory action while making the industry more transparent to small business owners.
- Revenue-Based Financing Gains Ground
While the MCA sector grapples with scrutiny, the Revenue Based Financing (RBF) model continues to gain traction—particularly in the startup and digital merchant ecosystems. This form of financing, which aligns repayment with a company’s revenue performance, appeals to founders and entrepreneurs who want to avoid equity dilution or rigid debt structures.
In 2023, a number of RBF platforms expanded their offerings to include analytics dashboards, integrations with sales platforms, and broader use of performance data in underwriting decisions. These innovations could accelerate adoption in 2024, especially in e-commerce, SaaS, and B2B service sectors.
With projected market growth at double-digit rates annually, RBF could emerge as a mainstream alternative to venture capital and traditional business loans in the years ahead.
- Compliance Will Be a Competitive Advantage
As oversight tightens and public attention grows, providers that proactively embrace compliance, transparency, and fair dealing will likely find themselves in a stronger position. Offering clear disclosures, fair terms, and user-friendly platforms is no longer just good ethics—it’s good business.
For brokers, lenders, and collections partners alike, 2024 may be the year to double down on systems, audits, and training. Those who fail to evolve risk becoming cautionary tales in an industry undergoing structural change.
Our Final Thoughts
2024 will not be business as usual for MCA funders. The days of easy growth and regulatory blind spots are giving way to a more mature, transparent, and accountable landscape. Those who can adapt to the changing tide—with strong operations, fair practices, and a willingness to evolve—stand to benefit from a market that is still hungry for flexible, non-bank capital.
