I went looking for Minnesota’s commercial financing disclosure law, the one that’s supposed to make merchant cash advance companies put their price in APR terms so a business owner can compare it to a bank loan. There isn’t one.
I searched the Revisor’s 2025 Minnesota Statutes and every session law from 2023 through 2026 for “commercial financing”, “sales-based financing”, and “merchant cash advance”. The only hit was a section of the Uniform Commercial Code about bills of lading for overseas shipments. Handy if you ship freight. Less so if you run a bakery. Chapter 47, where Minnesota keeps a lot of its lending rules, has nothing on it. Its sections 47.80 through 47.85 were repealed in 1995, in the interstate-banking article of that year’s financial institutions act, and nothing’s been put in their place.
So if you run a Minnesota business and someone offers you $50,000 today for $70,000 out of your future sales, no Minnesota statute requires them to tell you what that costs as a rate. You get to do the math yourself, and figure out which older laws still reach the deal.
Doesn’t Minnesota already cap what these companies can charge?
Not in any way you can count on.
Minnesota’s payday statute does define “annual percentage rate”, and it’s a good definition: “a measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made.” Minn. Stat. § 47.60, subd. 1(c). Too bad it’s in the wrong statute. That law covers only a “consumer small loan”, meaning cash advanced “for the borrower’s own personal, family, or household purpose.” § 47.60, subd. 1(a). A business advance is outside it by definition. I wrote about what that statute does cover at /news/minnesota-consumer-small-loans-47-60/.
The general usury statute reaches “the loan or forbearance of money”. Minn. Stat. § 334.01, subd. 1. Two problems. If the agreement says it isn’t a loan, the funder’s position is that usury doesn’t apply at all. Convenient. And even a real loan escapes Minnesota’s rate limits, apart from carve-outs for certain home-mortgage loans and contracts for deed, if it’s “made under a written contract, signed by the debtor, for the extension of credit to the debtor in the amount of $100,000 or more”. § 334.01, subd. 2. Business loans under $100,000 get a floating cap of their own, and I walked through both rules at /news/minnesota-usury-business-loan-interest/. None of it helps until somebody decides the advance was a loan.
So is a merchant cash advance a loan?
In Minnesota, nobody’s decided. I couldn’t find a Minnesota appellate decision on it, and I searched CourtListener’s Minnesota, District of Minnesota, and Eighth Circuit collections three ways.
Here’s what the Minnesota UCC does say, and it’s more than you’d expect. The funder can call it a purchase of your receivables all it wants. Article 9 applies to it anyway. The article covers “a sale of accounts, chattel paper, payment intangibles, or promissory notes”. Minn. Stat. § 336.9-109(a)(3). The buyer’s interest is a “security interest”, because that term “includes any interest of … a buyer of accounts”. § 336.1-201(b)(35). The buyer is a “secured party”, and you, the seller, are the “debtor”. § 336.9-102(a)(28)(B), (73)(D). So the deal lands in the same Article 9 system that governs secured lending.
And “account” is broad. It includes a right to payment “for property that has been or is to be sold” and one “arising out of the use of a credit or charge card”. § 336.9-102(a)(2). Your future card sales fit.
And if the deal really is a sale, this one stings: “A debtor that has sold an account, chattel paper, payment intangible, or promissory note does not retain a legal or equitable interest in the collateral sold.” § 336.9-318(a). Whatever you sold is theirs.
What can the funder do the day you fall behind?
More than you’d think, mostly without a lawsuit.
It can call your customers. “If so agreed, and in any event after default,” a secured party “may notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party”. § 336.9-607(a)(1)(A). Once your customer gets a signed notice that the account was assigned and payment goes to the assignee, your customer “may not discharge the obligation by paying the assignor.” § 336.9-406(a). In plain words, and subject to the exceptions written into that section: after that letter, a customer who pays you still owes them.
It may ask you to sign a confession of judgment. Minnesota still allows them, but a confession filed through an attorney requires an instrument signed by the debtor, and “such instrument must be distinct from that containing the bond, contract, or other evidence of the demand for which judgment is confessed.” Minn. Stat. § 548.23. A confession clause buried inside the funding agreement doesn’t meet that sentence. I covered the rest of the confession rules at /news/minnesota-confession-of-judgment-548-22/.
It’ll come after you personally if you signed a guaranty. That’s the clause that turns a business problem into a family one, and I explained what a guaranty commits you to at /news/personal-guaranty-minnesota-business-owner/.
Do the math Minnesota won’t make them do
Here’s a made-up deal, just to show the arithmetic. You get $50,000. You owe $70,000, a 1.4 multiple, collected by equal debits every business day. I priced it using § 47.60’s definition of APR and the actuarial method that section allows: solve for the rate that matches the timing of what you got to the timing of what you pay, then annualize it over 252 business days.
Collected over 84 business days, about four months, the daily debit is $833.33 and the APR is 212.7%. That isn’t a typo. Over 126 business days, about six months, it’s $555.56 a day and 142.2%. Over 168 business days, about eight months, $416.67 a day and 106.8%. Stretch it to 252 business days, a full year, and it’s $277.78 a day and 71.3%.
Watch what happens as the term shrinks. The dollar cost never moves, $20,000 every time, but the rate climbs because you’re paying it back faster. If your agreement takes a percentage of each day’s sales instead of a fixed debit, a strong quarter shortens the term. A good month makes the money more expensive.
That’s the number a disclosure law would force onto a page. Minnesota doesn’t have that law, so it’s on you to run it before you sign, with the real daily debit and purchased amount from your actual contract.
What you’ve got if the funder lied
Fraud in the pitch is still fraud. Minnesota’s consumer-fraud statute reaches deception by “any person” “in connection with the sale of any merchandise,” Minn. Stat. § 325F.69, subd. 1, and it defines “merchandise” as “any objects, wares, goods, commodities, intangibles, real estate, loans, or services.” § 325F.68, subd. 2. Loans were added to that list in 1997, so the act’s reach here is clearest if a court treats the advance as a loan. Ly v. Nystrom, 615 N.W.2d 302, 309 (Minn. 2000). In Ly, the Minnesota Supreme Court applied the act to a man defrauded while buying a restaurant, because it protects “a broad, though not limitless, range of individuals”. Id. at 310. And the private attorney general statute lets “any person injured by a violation” of the laws it lists “bring a civil action and recover damages, together with costs and disbursements, including costs of investigation and reasonable attorney’s fees”. Minn. Stat. § 8.31, subd. 3a. Here’s the catch, from the same opinion: the private remedy “applies only to those claimants who demonstrate that their cause of action benefits the public.” Ly, 615 N.W.2d at 314. The restaurant buyer in Ly didn’t get there, because he “was defrauded in a single one-on-one transaction”. Id. I covered how that requirement plays out at /news/minnesota-private-attorney-general-831/.
Federal law reaches it too. The FTC Act declares “unfair or deceptive acts or practices in or affecting commerce” unlawful, 15 U.S.C. § 45(a)(1), and the FTC has used it against a merchant cash advance operation. In the RCG Advances case, filed in June 2020, the FTC alleged the company misrepresented the terms of its advances to small businesses and used collection tactics “including threatening physical violence”. You won’t find that one in Article 9. A 2022 stipulated order permanently banned the company and one owner from the merchant cash advance industry, and in February 2024, a federal court entered a final judgment of more than $20.3 million against the operator who controlled it. FTC, RCG Advances, LLC, FTC File No. 192 3252, case summary and timeline.
Before you sign anything
Find four things in the agreement first: the purchased amount, the daily or weekly debit, whether that debit is fixed or a percentage of sales, and whether there’s a guaranty or a separate confession document attached. Then run the rate. If the funder won’t tell you how long it expects collection to take, run it at the short end.
Minnesota never made them print the price as a rate. Nobody’s stopping you from doing it yourself.
Madgett Law, LLC
If you’re looking at a funding agreement, or a funder has already started calling your customers, call me. Madgett Law, LLC represents Minnesota small businesses in debt collection defense, judgment and post-judgment disputes, and consumer-protection claims; advises businesses on the enforceability of credit documents and on guaranty exposure before they sign; and litigates usury and enforcement disputes. More on the business disputes we handle is on our business litigation page. Send us a message.
Sources: Minn. Stat. ch. 47 (no commercial financing disclosure provisions; §§ 47.80–47.85 repealed by 1995 Minn. Laws ch. 202, art. 4, § 26); Revisor of Statutes full-text search, 2025 Minnesota Statutes and 2023–2026 session laws, exact phrases “commercial financing”, “sales-based financing”, and “merchant cash advance” (sole statutory hit: § 336.2-323); Minn. Stat. § 47.60, subd. 1(a) (consumer small loan; personal, family, or household purpose), subd. 1(c) (annual percentage rate defined); § 334.01, subd. 1 (loan or forbearance of money), subd. 2 (written credit of $100,000 or more exempt); § 336.9-109(a)(3) (Article 9 applies to sales of accounts); § 336.1-201(b)(35) (security interest includes buyer of accounts); § 336.9-102(a)(2) (account), (28)(B) (debtor includes seller of accounts), (73)(D) (secured party includes buyer of accounts); § 336.9-318(a) (seller retains no interest); § 336.9-406(a) (account debtor’s discharge after notification); § 336.9-607(a)(1)(A) (secured party may notify account debtor); § 548.23 (confession instrument distinct from the contract); § 325F.69, subd. 1 (deception by any person in connection with the sale of any merchandise); § 325F.68, subd. 2 (merchandise includes intangibles and loans); § 8.31, subd. 3a (private remedies). Ly v. Nystrom, 615 N.W.2d 302, 309, 310, 314 (Minn. 2000). 15 U.S.C. § 45(a)(1). Federal Trade Commission, RCG Advances, LLC, FTC File No. 192 3252, case summary and timeline (complaint filed June 10, 2020; stipulated order as to RCG Advances and Robert L. Giardina entered June 2, 2022; findings of fact, conclusions of law, and final judgment as to Jonathan Braun filed February 6, 2024); FTC v. RCG Advances, LLC, No. 1:20-cv-04432 (S.D.N.Y.). The APR figures are an illustration computed by the author, not a real transaction.
This article is general legal information about Minnesota law, not legal advice, and reading it does not create an attorney–client relationship. Whether a particular funding agreement is a loan, a sale, or something else depends on its terms and the facts, and nothing here should be used to evaluate a specific agreement. No outcome is promised or implied.