August 12, 2025
Starting on September 1, 2025, Texas House Bill 700 will require providers of sales-based financing to give certain disclosures when making a specific offer to a Texas business. We reported on H.B. 700 in June when it was signed into law by Governor Greg Abbott, and in May as it progressed in the Texas House and Senate.
The Texas Office of Consumer Credit Commission ("OCCC") has confirmed it has not yet decided whether to adopt a model disclosure form. It is unlikely to do so in the coming months. As a result, sales-based financing providers will need to create their own disclosure forms for transactions entered into with Texas recipients on and after September 1, 2025. The disclosure requirements of H.B. 700 are summarized below.
Summary of the Disclosures
A provider who extends a specific offer of sales-based financing of less than $1 million to a recipient in Texas, must provide the following information:
1. the total amount of the financing;
2. the disbursement amount;
3. the finance charge;
4. the total repayment amount;
5. the estimated period for the periodic payments to equal the total repayment amount under the terms of the financing;
6. the payment amounts as follows:
a. if the payment amounts are fixed, the amounts and the frequency of payments; or
b. if the payment amounts are variable:
i. a payment schedule or a description of the method used to calculate the amounts and frequency of payments; and
ii. the amount of the average projected payments per month;
7. a description of all other potential fees and charges not included in the finance charge, including draw fees, late payment fees, and returned payment fees;
8. any finance charge the recipient will be required to pay if the recipient pays off or refinances the sales-based financing before the transaction is scheduled to be repaid in full;
9. any additional fees, not included in the finance charge, the recipient will be required to pay if the recipient pays off or refinances the sales-based financing before the transaction is scheduled to be repaid in full;
10. a description of collateral requirements or security interests, if applicable; and
11. a statement outlining whether the provider will pay compensation directly to a sales-based financing broker in connection with the specific offer of sales-based financing and, if applicable, the amount of the compensation.
In addition, if as a condition of obtaining sales-based financing, the provider requires the recipient to pay off the outstanding balance of an existing sales-based financing, the provider must disclose to the recipient:
1. the amount of the new sales-based financing used to pay off the portion of the outstanding balance of the existing sales-based financing that consists of:
a. prepayment charges required to be paid; and
b. any unpaid interest expense or finance charges that were not forgiven at the time of renewal of the transaction; and
2. if the disbursement amount will be reduced to pay down any unpaid portion of the outstanding balance, the actual dollar amount by which the disbursement amount will be reduced.
The provider must obtain the recipient's signature on the disclosures before finalizing the application for the sales-based financing transaction.
Developing Your Disclosure Forms
Some of the terms used in these disclosure requirements are defined in H.B. 700. Others require additional interpretation of the statute. Because the OCCC does not intend to adopt a model disclosure form, providers should consult with legal counsel to determine how to design a form of disclosure statement that meets the requirements established by this new law.