Manatt, Phelps & Phillips LLP
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Merchant Cash Advance providers, commercial litigation funders,
online SMB lending platforms and other nonbank small-business
lenders, take note: Following the lead of California and New York, Utah is now the third state
to enact disclosure requirements for commercial
lending transactions. In contrast to the otherwise similar
California and New York laws, the Utah law does not require
disclosure of an Annual Percentage Rate and requires commercial
lenders to register as commercial loan providers with the Utah
Department of Financial Institutions. Factoring transactions are
excluded. Several similar laws are pending in various other
The law will apply to “providers” of
“commercial loans” made on or after January 1, 2023. A
“provider” includes anyone who “consummates more
than five commercial financing transactions in the state during any
calendar year,” and a “commercial loan” is
expressly defined as including accounts receivable purchase
transactions. Notably, the definition of a “provider”
also includes any person who “under a written agreement with
a depository institution, offers one or more commercial financing
products provided by the depository institution via an online
platform that the person administers.”
However, the new law does not apply to transactions of more than
$1 million, depository institutions and their subsidiaries,
entities regulated by a federal banking agency, licensed money
transmitters, commercial financing transactions that are secured by
real property, purchase money obligations, open-ended commercial
loans for $50,000 or more to a motor vehicle dealer or auto rental
company, or commercial loans in connection with the sale of a
product or service that such person, or that person’s
affiliate, manufactures, licenses or distributes.
Commercial lenders will be required to disclose the
- The total amount of funds provided.
- The total amount of funds disbursed to the borrower, if less
than the amount provided.
- The total amount to be paid to the commercial lender.
- The total dollar cost of the transaction.
- The manner, frequency and amount of each payment or, if the
amount of each payment may vary, “the manner, frequency, and
estimated amount of the initial payment.”
- A statement of whether there are any costs or discounts
associated with prepayment of the commercial loan, including a
reference to the section of the agreement that creates such cost or
- If any portion of the borrower’s loan was paid to a
broker rather than to the borrower, the amount paid to the broker
must be disclosed.
- A description of the methodology that will be used to calculate
any variable payment amount and the circumstances that may cause
variations in the payment amount.
For open-ended commercial loan transactions, these disclosures
must be made prior to the consummation of the open-ended loan, and
again within 15 days after the end of each month during which funds
are disbursed under the open-ended loan.
Providers of commercial loans will be required to register via
the Nationwide Multistate Licensing System and Registry beginning
January 1, 2023.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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