What are my rights when a broker arranges my financing?

When a broker arranges your financing, you have the right to see the lender's actual terms before you sign, to know how your broker is paid, to get the reasons if you are turned down and to walk away from any offer. Some of these rights come from federal law, some from state disclosure laws, and some from the way the best brokers already work.

Business financing does not carry the full set of consumer protections that apply to a mortgage or credit card. That makes it worth knowing exactly what protections you do have.

The right to see the real terms

In eleven states, the provider must give you a written disclosure before you sign: California, New York, Utah, Virginia, Georgia, Florida, Connecticut, Kansas, Missouri, Louisiana and Texas. Each disclosure shows what you receive, what you repay and how payments work. Venable reports that New York's law covers financing up to $2,500,000 and requires an APR, and that you sign the disclosure before the application moves forward. Our guide to commercial financing disclosure laws lists what each state requires.

In every state, you have the practical right to see the lender's offer itself, not a summary. A good broker sends you the lender's term sheet or disclosure without being asked. Refusing to show the lender's offer is one of the clearest warning signs in this business.

The right to know how your broker is paid

Several states make broker pay visible on the disclosure:

• Texas. HB 700 requires the provider to state whether it will pay the broker directly, and how much.
• Virginia and Connecticut. Both require the provider to disclose broker compensation on sales-based financing, according to Mayer Brown.
• SBA loans, everywhere. SBA Form 159 lists every agent paid on an SBA loan and what each one received. The form states an agent may not be paid by both you and the lender for the same service.

Where the law is silent, ask. "Who pays you, and how much?" is a fair question, and established brokers answer it in one sentence. Our guide to SBA Form 159 shows how that disclosure works on SBA deals.

The right not to pay before there is an offer

Florida, Georgia and Louisiana bar brokers from collecting advance fees. Mayer Brown reports that Florida allows only bona fide third party costs up front, and that Georgia also bars brokers from making false or misleading representations. Florida brokers must include their address and phone number in their advertising.

Most brokers are paid only when a deal funds, usually by the lender. A request for money before any lender has made you an offer, whatever it is called, is the behaviour to watch for.

The right to reasons when you are declined

The Equal Credit Opportunity Act covers business credit, and its Regulation B gives you notice rights. Under 12 CFR 1002.9:

• Businesses with gross revenue of $1 million or less are entitled to notice of the action taken on the application, orally or in writing, and to a statement of reasons. The creditor may tell you about the right to reasons at the time you apply.
• Businesses with gross revenue over $1 million are entitled to notice within a reasonable time, and to written reasons if they request them in writing within 60 days.

The rule applies to the creditor, not the broker, but your broker can request the decline reasons for you. Knowing why a lender passed helps your broker pick the next lender well.

The right to fair treatment

The Federal Trade Commission treats deceptive practices against small businesses as unlawful under the FTC Act. DLA Piper reports that in May 2021, merchant cash advance provider Yellowstone Capital and its principals agreed to a $9.8 million settlement over alleged misstatements of terms and withdrawals taken after advances were repaid, with the principals held personally liable.

State laws add specific protections:

• No confession of judgment. Texas HB 700 voids confession of judgment clauses in sales-based financing, Mayer Brown reports Virginia does the same, and California's AB 2116 bans them for covered financing from 2028.
• Limits on automatic debits. In Texas, a provider or broker may not set up automatic debits from your deposit account unless it holds a perfected first priority security interest.
• The right to share your terms. Holland and Knight reports that California's AB 2116 bars contract terms that stop you from disclosing the terms of your financing.

The right to say no

Until you sign the financing agreement, you owe nothing. You can decline an offer, ask your broker to negotiate, or ask for more options. Pressure to sign the same day, especially with a deadline that appears out of nowhere, is a tactic, not a feature of the lender's process.

You also choose how many brokers to work with. Our guide on one broker or several covers the trade-offs.

Rights you can claim from any broker

Whatever your state requires, these are reasonable asks of any broker, and the best ones offer them before you ask:

1. The lender's written offer or disclosure for every option
2. The broker's compensation, in dollars, and who pays it
3. Confirmation of any state registration that applies, with the number
4. The reasons for any decline the broker learns from a lender
5. Time to review the agreement before you sign

If something goes wrong

Start with the regulator in the state where your business is located. In registration states, that is the agency that registered the broker: the Texas OCCC, Virginia SCC, Connecticut Department of Banking, Utah Department of Financial Institutions or Missouri Division of Finance. In other states, the attorney general's office handles commercial financing complaints. For deceptive practices, you can also report to the FTC.

Before any of that, check the broker's standing on the register. Every entry carries a register number, a status and a last checked date, and verified entries show fees in writing. If you would rather have AI run the whole search and comparison for you, businessloanbroker.ai is Levr's own brokerage for business owners.