On December 23, 2020, New York Governor Mario Cuomo signed legislation adding a new Article 8 to the Financial Services Law, “Commercial Financing,” that requires nonbank commercial loan providers to make disclosures to small business borrowers. The law applies only to loans of $500,000 or less.

The commercial lending to which the new law pertains includes open-end financing, closed-end financing, sales-based financing, factoring transactions or other form of financing the proceeds of which the recipient does not intend to use primarily for person, family or household purposes.

The term “providers” includes not only the party extending credit but also persons who solicit and present offers of commercial financing on behalf of a third party.

The disclosures are to be made at the time a specific offer of credit is made and are similar to those made in consumer transactions, including the total amount of the loan, finance charges, other fees, annual percentage rate, and the terms of repayment.

Providers that are exempt from the new law’s requirements include regulated banking organizations, persons acting as technical services providers to exempt entities and providers making loans secured by real property.

The New York Superintendent of Financial Services is authorized to promulgate rules and regulations as she deems consistent with the effective administration of the law, including how to calculate metrics to be disclosed to the borrower and prescribing the format of the disclosures.

Providers that violate the law or regulations could be penalized $2,000 per violation (and $10,000 for willful violations).

The law becomes effective June 21, 2021.