January 15, 2025
The Missouri Division of Finance has released information regarding the registration requirement for commercial financing brokers under its new Commercial Financing Disclosure Law. The registration requirement becomes effective either six months after the Division finalizes rules under the CFDL or, if the Division does not intend to promulgate rules, on February 28, 2025. The Division must announce any intention to promulgate rules no later than February 28, 2025, and we do not believe that it will announce any such intention. As a result, we expect the requirement to take effect next month.
The CFDL requires a broker to register on a form provided by the Division. That form is available online here. The broker must also obtain a $10,000 surety bond. The bond form is available online here. A broker must pay an initial registration fee of $100. After initial registration, the broker must renew annually by January 31, updating the registration information and paying a $50 annual fee.
The CFDL defines the term "broker" to mean "any person who, for compensation or the expectation of compensation, obtains a commercial financing transaction or an offer for a commercial financing transaction from a third party that would, if executed, be binding upon that third party and communicates that offer to a business located in [Missouri]." The term does not include a provider or any individual or entity whose compensation is not based or dependent on the terms of the specific commercial financing transaction obtained or offered.
The CFDL applies to sales-based financing transactions, commercial loans, and commercial open-end credit plans extended to businesses in Missouri. Transactions with amounts financed greater than $500,000 are exempt. Although a provider may consummate up to five commercial financing transactions in Missouri per 12-month period without being subject to the CFDL, no such de minimis exemption is available to brokers.
Please see last month's BizFinLaw alert on Missouri's commercial financing disclosure requirements that also go into effect on February 28, 2025.