Texas Funding Disclosures: What Your Small Business Funding Offer Should Tell You

Why Disclosure Matters for Texas Small Business Owners

When you apply for small business funding in Texas, the offer you receive should be more than a single number. Whether you are looking at a merchant cash advance, a term loan, or a business line of credit, clear disclosure of costs and terms is what lets you compare offers and avoid surprises. This guide explains how disclosure rules for business funding work, what to confirm for a Texas business, the key terms every offer should spell out, and how to protect your business before you sign.

Get Working Capital Now is a free matching service that connects you with vetted funding partners. We are not a lender, and we do not make credit decisions or issue funds. Our goal is to help you find offers that are straightforward to understand.

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What a Clear Funding Offer Should Show

How Disclosure Rules Are Set

Consumer loans come with standardized federal disclosures, but business-purpose financing generally does not, so the question of what a business funder must disclose has been taken up state by state. Several states have passed commercial financing disclosure laws that require a standardized cost disclosure before the business signs, others have considered similar bills, and the rules continue to change. Before relying on any summary, including this one, confirm what currently applies to a Texas business with the Texas Attorney General's office, the state's financial regulator, or a business attorney.

Whatever the rules say, you can always ask a funder for written terms, and a funder that stands behind its offer should provide them. The list below covers what to ask for by type of funding.

What to Expect by Funding Type

• Term loans: the principal, the interest rate and an estimated APR, the repayment term, and every fee. An APR that includes origination fees and other charges shows the yearly cost more accurately than the interest rate alone.
• Merchant cash advances: the advance amount, the factor rate, the total repayment amount, and how repayment is collected, such as daily ACH debits or a percentage of sales. MCAs are usually structured as a purchase of future receivables rather than a loan, which is why they are priced with a factor rate instead of an interest rate. Whether a specific agreement is treated as a loan depends on its terms, and courts have reached different conclusions, so an attorney should review anything unclear. You can still ask for an estimated APR to compare an advance with other options.
• Business lines of credit: the credit limit, the draw period, the interest rate or APR, any annual or draw fees, and the minimum payment terms.
• Equipment financing: the equipment cost, the down payment, the rate, the term, the total of all payments, and for a lease, what happens at the end of the term.

Key Terms to Insist On in Your Offer

Total Funding Amount and Fees

Every offer should state clearly how much money you will receive up front, meaning the net amount after any fees are deducted. Common fees include origination, documentation, underwriting, and processing fees. Ask for each fee to be listed in writing with its amount and when it is charged. As an illustration, a $50,000 offer with $2,500 in deducted fees puts $47,500 in your account, and your cost should be measured against that $47,500.

Factor Rate vs. Interest Rate

For a merchant cash advance, the factor rate is the multiplier used to calculate total repayment. A factor rate of 1.25 on a $10,000 advance means you repay $12,500. That is not an interest rate, and it says nothing about time. If the $12,500 is collected through daily debits over about six months, the annualized cost is roughly 90%; stretched over about twelve months, it would be roughly 46%. For a term loan, the interest rate is a yearly percentage, and the APR adds fees to show the full annual cost. (Figures are illustrative and assume about 21 business days of payments per month.)

Repayment Schedule and Term

Your offer should specify how often payments are due (daily, weekly, or monthly), how much each payment is, and the total number of payments or the estimated term. For many advances, repayment is a fixed daily or weekly ACH withdrawal until the total is paid; for loans, the schedule shows each payment and due date. If a payment is based on a percentage of your sales, ask how it is calculated and whether it can be adjusted if sales fall.

Prepayment Penalties and Default Terms

Some funders charge a penalty if you pay off early, and with many advances the total repayment is fixed, so paying early may save nothing unless the agreement offers a discount. Ask for the early payoff terms in writing. The offer should also explain what happens if you miss a payment: late fees, any default rate, and whether the full balance can become due at once.

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How to Read the Fine Print

Hidden Fees to Watch For

Beyond the obvious fees, look for application fees, due diligence fees, wire fees, and UCC lien filing fees. Ask for a complete fee schedule and check that every fee in the contract appears on it.

Personal Guarantee and Collateral

Many business funding agreements require a personal guarantee, which means you can be personally responsible if the business cannot pay. Many also involve a lien on business assets. Both should be spelled out clearly, along with any specific collateral such as equipment or receivables.

Automatic Renewal and Confession of Judgment

Some contracts include renewal terms that encourage taking a new advance before the old one is paid off, which can mean paying fees on money you still owe. Some agreements also include a confession of judgment, which can let a funder get a judgment quickly if you default. Several states restrict them. Look for this language before you sign, and ask an attorney about it if you find it.

Protecting Your Business Before You Sign

Get Written Terms First

Ask for a written offer that includes all the material terms before you sign anything. If a funder refuses, treat it as a red flag. Take the time to read the offer and the full agreement, and make sure the numbers match what you were told.

Questions About Rates and Legality

Whether a particular funding agreement raises legal concerns depends on how it is structured and on rules that differ by state and by product. If you are unsure whether an offer's pricing or terms are appropriate, a business attorney is the right person to ask before you sign. If an offer turned out to be different from what you were told, keep copies of every document and message, ask the funder in writing to explain the difference, and report deceptive practices to the Texas Attorney General's office or the FTC. A business attorney can tell you what options you have.

Cancellation Policies

Do not assume you can cancel a business funding agreement after signing. Ask whether the funder offers any review or cancellation period, and get the answer in writing before you sign.

Practical Tips for Comparing Offers

Use Total Cost of Capital

Instead of focusing on the factor rate or interest rate alone, calculate the total dollar amount you will repay. A $20,000 advance at a 1.3 factor rate means repaying $26,000, a $6,000 cost. A $20,000 loan at an illustrative 15% APR over 12 months means repaying about $21,660, a cost of about $1,660. The advance may still make sense if you need speed or cannot qualify for the loan, but you should know the difference before you choose. (Figures are illustrative.)

Ask for a Sample Repayment Schedule

Request a schedule showing each payment amount and date. Put it next to your own cash flow for the same weeks, including your slowest ones, to see whether the payments fit. If the schedule runs through a season when your sales usually dip, ask whether the payment can be adjusted, and get the answer in writing.

Check the Funder's Background

Look the company up through the state's business entity search, check its record with the Better Business Bureau, and read reviews from other business owners. Ask the funder directly whether it holds any licenses or registrations, and if you want to confirm the answer, the state's financial regulator or a business attorney can help.

Watch for Red Flags

• Pressure to sign the same day, or before you have seen the full agreement.
• A request for a fee before you are funded, especially one described as securing your approval.
• Blank spaces or missing pages in the documents you are asked to sign.
• Contract terms that differ from what a representative told you.
• Reluctance to put the total repayment or the payment schedule in writing.

How Get Working Capital Now Helps

Our free service matches Texas business owners with vetted funding partners. We do not charge you any fees, and we never promise approval or specific rates. Instead, we help you find partners who can present offers that include the key terms discussed here, so you can compare them side by side.

Remember, we are a matching service, not a lender. We do not make credit decisions or issue funds, and your agreement is with the funding partner you choose.

Conclusion

Disclosure rules for business funding vary by state and keep changing, so confirm what applies to a Texas business with the Texas Attorney General's office or a business attorney rather than assuming either way. Whatever the rules, you can always ask for clear, accurate information, and you should have it before you sign. Read the fine print, ask questions, and compare total costs. If an offer is unclear or missing key details, walk away.