STATEMENT TO

[First Reprint]

SENATE SUBSTITUTE FOR

SENATE, No. 2262

with Senate Floor Amendments

(Proposed by Senator SINGLETON)

ADOPTED: JANUARY 31, 2019

      These amendments define “cash advance” to mean a financing option that allows a small business concern to sell all or a portion of its future sales collections or other future revenues in exchange for an immediate payment.

      The amendments require providers who offer cash advances to make the following disclosures:

      (1) the total dollar costs to be charged to a small business concern, assuming the small business concern delivers all purchased receivables to providers at the time they are generated or at a mutually agreed upon time, and all required fees and charges that are paid by the small business concern and that cannot be avoided by the small business concern;

      (2) the amount financed, which shall mean the advance amount less any prepaid finance charges; and

      (3) for a cash advance that calculates repayment costs dependent on the small business concern’s future receivables, the estimated annual percentage rate, provided as a range, with at least three different repayment times provided and a narrative explanation of how each rate was derived.  Any estimated annual percentage rate is to be calculated using a projected sales volume that is based on the small business concern’s average historical sales or the sales projections relied on by the provider in underwriting the cash advance; or

      (4) for a cash advance that calculates repayment costs as a fixed payment, the annual percentage rate, expressed as a nominal yearly rate, inclusive of any fees and finance charges.

      The bill also makes changes to the disclosures required for providers of factoring or asset-based transactions concerning how the purchase price and advance rates for those transactions are to be expressed.