Alert

June 16, 2025

Louisiana Clarifies that Amounts Charged in Revenue-Based Financing Transactions Are Not "Interest" and Establishes Disclosure Requirements for Such Transactions

On June 8, 2025, Louisiana Governor Jeff Landry signed House Bill 470, which specifies that amounts charged in revenue-based financing transactions are not interest. The new law also establishes disclosure requirements for revenue-based financing transactions.

The law defines "revenue-based financing transaction" as "an agreement under which a person engaged in a commercial enterprise sells or agrees to forward a percentage of sales, revenue, or income, and the person's payment obligation increases and decreases according to the volume of sales made or revenue or income received." The law states that a revenue-based financing transaction "is not a transaction for the use, forbearance, or detention of money" and "[a]mounts charged in a revenue-based financing transaction, whether in the nature of a fee, discount, or otherwise, are not interest."

Effective August 1, 2025, a provider of revenue-based financing must give the following disclosures with each transaction:

• The total amount of funds provided to the commercial enterprise under the terms of the agreement.
• The total amount of funds disbursed to the commercial enterprise if less than the amount specified in the bullet point above as a result of any fees deducted or withheld at disbursement, any amount paid to the provider to satisfy a prior balance, and any amount paid to a third party on behalf of the commercial enterprise.
• The total amount to be paid to the provider under the terms of the agreement.
• The total dollar cost under the terms of the agreement, calculated by finding the difference between the amount specified in the first bullet point and the amount specified in the third bullet point.
• The manner, frequency, and amount of each payment, or if the amount of the payments vary, the manner and frequency of the payments, the estimated amount of the initial payment, a description of the methodology for calculating any variable payment, and the circumstances under which payments may vary.
• Whether there are any costs or discounts associated with prepayment, including a reference to the provision in the transaction that creates the contractual rights of the parties related to prepayment.

The required disclosures do not include an annual percentage rate. The new law does not specify exemptions, nor does it expressly provide penalties for non-compliance.