Texas MCA Shake-Up: New Law Threatens Cash Advances & Small Business Survival

📅 Posted by HybridFunder

Published July 22, 2025

💡 Introduction

Texas Governor Greg Abbott recently signed House Bill 700 (effective Sept 1, 2025), implementing sweeping new regulations on commercial sales-based financing—the legal term covering Merchant Cash Advances (MCAs). While designed for transparency, this law has caused concern as many MCA providers have paused operations in Texas, leaving small businesses struggling for daily cash flow solutions.

⚖️ What Is HB 700 & Why It Matters?

According to Holland & Knight, HB 700 requires every provider and broker offering sales-based financing in Texas to:

• Register with the state’s Office of Consumer Credit Commissioner 🔄

• Disclose repayment amounts, fees, payment frequency, collateral, broker compensation, and other terms for deals under $1M JD Supra+14Holland & Knight+14deBanked+14deBanked+1Consumer Financial Services Law Monitor+1

• Eliminate automatic debits from merchant accounts unless the provider holds a legally perfected, first-priority security interest—the cornerstone of traditional MCA repayment models JD Supra+7Consumer Financial Services Law Monitor+7deBanked+7

These rules aim to build transparency but undermine MCA’s very foundation: seamless daily or weekly repayment based on sales.

🚫 Why Lenders Are Halting in Texas

Industry commentary highlights a serious fallout:

• MCAs rely on automatic debits tied to credit card or bank receipts—now effectively prohibited without complex account liens deBanked+12deBanked+12Onyx IQ+12

• The requirement to register, renew annually, and pay state fees adds operational burden—with penalties up to $10,000 per violation and $100K total MonitorDaily+6Texas Legislature Online+6deBanked+6

• As a result, many MCA providers have been forced to pause lending in Texas, disrupting the primary lifeline for businesses facing tight cash cycles Consumer Financial Services Law Monitor+11deBanked+11Onyx IQ+11

💸 What This Means for Texas Business Owners

Small business owners—including restaurants, retailers, trades, and service providers—are losing access to a key funding source that helps manage daily expenses, shortfall periods, and emergency needs.

Merchant cash advances offer:

• Flexibility in repayment based on sales volume

• Approval with limited docs—even for lower-credit businesses

• Speed: funding in 24 hours, unlike traditional loans

Now, those lifelines are disappearing—just when businesses need them most.

⚙️ The Bread & Butter of MCAs

MCA isn’t a loan—it’s a sales-based financing tool structured to match business revenue flow:

• Repayment tied to daily/weekly sales, adjusting automatically during slow periods

• Minimal documentation required—mostly bank statements

• Accessible to lower-credit applicants

• Ideal as a short-term bridge for cash flow, not long-term financing

This model is under threat in Texas, creating a real risk for businesses that depend on it.

🔄 What Alternatives Are Left?

Going forward, Texas businesses might need to pivot to:

• Traditional bank loans or SBA financing—but these take weeks or months and require strong credit

• Equipment loans, lines of credit, or merchant processing splits—but each comes with its own restrictions

• Licensed providers working with first-lien security interests or non-ACH repayment models—but few early adopters exist

📝 What Businesses Should Do Now

If you're in Texas and use (or rely on) MCA funding:

1. Act fast: Submit your application or line up financing before Sept 1

2. Talk to your provider: Ask about new structures or compliant payment methods

3. Plan alternatives: Start preparing to use credit lines, term loans, or partner programs

4. Stay informed: Rulemaking starts in Sept 2025—watch for compliance guidance from the state

🚀 How HybridFunder Can Help

As a syndication partner, HybridFunder works with multiple lender types—including banks and fintech platforms—to keep your options open:

• We can shift you into non-ACH repayment structures where possible

• If MCAs disappear in Texas, we'll help pivot you to compliant loans

• We stay on top of rulemaking to bring you solutions as soon as they’re available

We’re committed to keeping small businesses funded—no matter the regulatory terrain.

💭 Final Thoughts

HB 700’s goal is transparency—but its unintended consequences threaten to cut off essential daily capital for Texas businesses. With most MCA providers hitting pause, now is the time for businesses to explore alternatives.

If you're based in Texas and need immediate or compliant funding, HybridFunder is here to help. We’ll navigate these changes with you, so your daily business operations don't suffer.

📤 Apply Now or call/text us at (347) 201-2367 for help securing funding before the deadline.

🔒 Disclaimer & Legal Notice

HybridFunder is a syndication partner and not a direct lender. We do not operate as a bank in Texas. All funding offers are provided through third-party financial institutions and subject to underwriting approval. HB 700 is effective Sept 1, 2025; funding structures in Texas are evolving. Always consult your legal advisor for compliance questions.