HB1007 adds a new “Commercial Financing” subtitle to Maryland’s Financial Institutions Article and imposes standardized disclosure and calculation rules for a broad range of non‑consumer commercial financing products: open‑end and closed‑end loans, sales‑based (revenue‑based) financing, factoring transactions, and other commercial extensions of credit. The bill prescribes what providers must disclose (finance charge, total repayment amount, APR, payment schedule, collateral and fees), how to calculate an APR for atypical products, and signature and reporting requirements.
The measure matters because it treats small‑business financing like consumer credit for disclosure purposes, forcing otherwise opaque products (revenue‑based advances, factoring) into a comparable disclosure framework. That creates compliance obligations for nonbank lenders and fintechs, gives small businesses clearer price signals, and gives the commissioner authority to adopt implementing regulations and enforce violations with civil penalties and remedial orders.
At a Glance
What It Does
The bill requires providers to deliver itemized disclosures when making a specific commercial‑financing offer, including finance charge, total repayment, APR (labelled “APR”), term, projected periodic payments and collateral descriptions. It prescribes APR calculation rules tied to TILA/Regulation Z and adds Maryland‑specific assumptions (e.g., estimated term for sales‑based deals, maximum draw assumptions for open‑end plans). Providers must also choose and report a method to project sales for revenue‑based financing and submit annual data if they use the opt‑in method.
Who It Affects
Nonbank commercial‑finance providers and fintech platforms that originate, broker, or present specific offers in Maryland; factoring firms and revenue‑based funders; small businesses that take commercial financing; and the Maryland Commissioner of Financial Regulation tasked with rulemaking, approvals and enforcement. Federally or state‑chartered banks and their affiliates, certain technology service providers, very small in‑state providers and very large transactions are carved out.
Why It Matters
HB1007 standardizes disclosure across products that today lack comparable pricing metrics, reducing information asymmetry in small‑business lending. It pushes the market to present APRs for products that historically resisted such measures (revenue‑based finance, factoring), shifting commercial negotiation dynamics, compliance workloads, and potentially underwriting or product design.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
HB1007 defines the covered universe and then builds a disclosure and calculation regime around it. The statute covers 'commercial financing' broadly — open‑end and closed‑end credit, sales‑based (revenue‑based) financing, factoring, and other extensions of credit where proceeds are used for business (not personal) purposes — while excluding federally/state‑chartered banks and several other narrowly specified categories.
The opening definitions set the stage by distinguishing product types and describing the finance charge and 'specific offer' concept (a quoted, binding offer based on information about the recipient).
For each product type the bill prescribes a package of required disclosures that providers must give before a recipient proceeds: the disbursement amount (net of fees withheld), the finance charge, an APR labelled as “annual percentage rate” or “APR,” the total repayment amount, the term (or estimated term), projected payment amounts or method to compute them, other avoidable fees, and any collateral or security interests. Closed‑end, open‑end, sales‑based and factoring offers each have tailored rules on what assumptions to use when calculating APRs — for example, open‑end plans must assume the maximum available draw is taken and held for the draw period; sales‑based APRs must be based on a projected repayment term derived from projected sales volume.Sales‑based financing gets particular treatment: providers must calculate an estimated term of repayment and APR based on projected sales volume and projected periodic payments.
The bill allows two projection methods: a 'historical' average over a fixed lookback (1–12 months, or the highest same‑length window in the prior 12 months) or an 'opt‑in' projection subject to a commissioner‑approved review process. Providers who choose opt‑in must report to the commissioner annually (by January 1) comparing estimated APRs to actual APRs for completed transactions; the commissioner may require a switch to the historical method if deviations are unreasonable.Factoring transactions are treated as single‑advance, single‑payment transactions for APR calculation (using Reg Z Appendix J mechanics) and must disclose the purchase price, disbursement, finance charge, APR, and description of receivables purchased.
The bill also governs prepayment and rollovers: providers must disclose whether payoff triggers additional finance charges beyond interest accrued since the last payment, how prepayment charges are computed (including a formula for fixed total‑repayment products and an explicit 'double‑dipping' disclosure if new proceeds are used to pay unpaid finance charges), and the exact dollar reduction in disbursement when new funds are used to pay existing unpaid balances.Operational rules close the loop: each required disclosure must be signed (manually or electronically) before proceeding with an application; providers may present additional metrics but cannot label non‑APR metrics as an annual rate; the commissioner must adopt regulations substantially similar to New York’s commercial financing rules and may accept substantially similar out‑of‑state disclosure forms; and enforcement includes civil penalties, restitution and injunctive relief with investigatory powers borrowed from existing supervisory authority.
The Five Things You Need to Know
A provider that makes five or fewer commercial financing transactions in Maryland in any 12‑month period is exempt from the subtitle’s requirements.
Commercial financing transactions with principal amounts greater than $2,500,000 are excluded from the statute.
For sales‑based financing a provider must choose either a fixed historical‑average method (1–12 month lookback) or an opt‑in projection method; opt‑in users must report estimated vs. actual APRs to the commissioner by January 1 each year.
If a provider uses new‑loan proceeds to pay unpaid finance charges on an existing loan, the provider must disclose the actual dollar reduction of the new disbursement and flag any amount used to cover unpaid finance charges as potential 'double dipping'.
The commissioner may impose civil penalties up to $2,000 per violation or $10,000 per willful violation and may order restitution or injunctive relief; the commissioner also must adopt regulations substantially similar to New York’s commercial financing rules.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Definitions that structure the regime
This section defines key product categories (open‑end, closed‑end, sales‑based, factoring) and the operative terms 'provider', 'recipient', 'finance charge', and 'specific offer.' The practical effect is to sweep a wide array of small‑business financing arrangements into the statute while giving the text hooks — e.g., the 'specific offer' concept — the rest of the subtitle uses to trigger disclosure obligations.
Targeted exemptions and carved‑out products
HB1007 excludes federally or state‑chartered banks and their affiliates, technology service providers that don't take an interest, Farm Credit lenders, real‑property‑secured loans, UCC Article 2A leases, very small in‑state providers (≤5 transactions in 12 months), very large transactions (>$2.5M), certain dealer/rental car financings over $50,000, health‑care receivable advances for personal‑injury claims, and premium‑finance agreements. Those carveouts narrow the statute’s scope and will shape which market participants carry the compliance load versus which keep legacy regulatory treatment.
APR expression and Maryland‑specific calculation rules
The bill requires APRs to be expressed as yearly rates and calculated in accordance with the federal Truth in Lending Act and Regulation Z, but adds Maryland‑specific requirements: the APR must be based on the provider’s estimate of the term of repayment and the projected periodic payments even where federal law wouldn’t otherwise mandate an APR. Importantly, the statute contains a safe harbor‑style clause saying providers won’t incur liability simply because a charged APR later differs from the provider’s disclosed estimate.
Product‑specific disclosures for sales‑based, closed‑end and open‑end offers
The statute spells out a core disclosure set for each product family: disbursement/net proceeds, finance charge, APR (labelled), total repayment amount, term/estimated term, projected payment amounts or calculation method, avoidable fees, and collateral. Sales‑based financing rules require calculating an estimated term from projected sales; closed‑end rules demand APR and term disclosure per Reg Z; open‑end rules instruct providers to assume the maximum available credit is drawn and held when computing the total repayment and APR. The payment‑projection language requires average monthly equivalents if payment frequency is not monthly and mandates disclosures for both fixed and variable payment structures.
Factoring treated as single‑advance single‑payment APR
Factoring disclosures must show the purchase price (and net disbursement), the finance charge, total payment amount, APR calculated per Reg Z Appendix J as a 'single advance, single payment' transaction, and a description of receivables purchased. The statute explicitly treats discounts on face value as part of the finance charge, forcing factoring firms to present a standardized APR even where industry practice reports only discount rates or fees.
Catch‑all disclosures for other commercial financing
For any commercial financing that doesn’t neatly fit the defined buckets but otherwise falls inside the subtitle, providers must deliver the same core disclosure set (finance charge, APR, total repayment, term, payments and fees). The bill thus minimizes regulatory arbitrage via novel contract forms designed to avoid a named category while ensuring comparable information reaches recipients.
Prepayment, payoff, double‑dipping and disclosure mechanics
Providers may require payoff of an existing transaction as a condition of new financing, but must disclose how much of the new proceeds will be used to pay prepayment charges and any unpaid interest not forgiven. For fixed total‑repayment products the bill gives a formula tying the prepayment charge to the original finance charge pro rata; if prepayment results in non‑zero charge the provider must pose an explicit 'double‑dipping' disclosure showing the amount used to pay unpaid finance charges.
Signatures, permitted extra metrics, regulator powers and penalties
Every required disclosure must be signed (paper or electronic) before the recipient proceeds with the application; providers may give additional metrics but cannot label non‑APR metrics as an annual rate. The commissioner must adopt regulations substantially similar to New York’s commercial financing rules and may approve out‑of‑state forms that meet or exceed Maryland’s standards. Enforcement allows the commissioner to investigate complaints, levy civil penalties up to $2,000 per violation or $10,000 per willful violation, order restitution and seek injunctive relief.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Small businesses seeking capital — they get standardized, comparable price and repayment disclosures (APR, total repayment, projected payments and collateral) that reduce informational asymmetry when evaluating offers.
- Borrowers using sales‑based or factoring products — these providers historically report nonstandard metrics; HB1007 forces APR presentation, which helps owners compare cost across loan types and negotiate terms.
- Maryland regulator and policymakers — the commissioner receives structured reporting (including annual opt‑in reporting) and a clearer enforcement toolkit to police deceptive or inconsistent pricing practices.
Who Bears the Cost
- Nonbank providers and fintech platforms that originate or present specific offers — they must implement APR calculation routines for atypical products, build new disclosure flows, retain records, and possibly redesign products to accommodate standardized metrics.
- Factoring firms and revenue‑based funders — these players must translate discounts, holdbacks and percentage‑of‑revenue mechanics into Reg Z‑style APRs and produce supporting projections and disclosures, which may require actuarial or compliance inputs.
- Maryland’s licensing and supervisory apparatus — the commissioner must write and enforce regulations, review opt‑in reports, and investigate deviations; that work increases administrative cost and may require new technical capacity or guidance.
Key Issues
The Core Tension
The bill’s central dilemma is between enforceable, comparable price disclosure (benefitting recipients and regulators) and faithful measurement of economic cost for nontraditional products (which resist tidy annualization). Standardizing APRs improves apples‑to‑apples comparisons but can either overstate or obscure the real risk/price tradeoffs of revenue‑sensitive and receivables‑based financing, potentially reducing product availability or incentivizing contractual redesigns that circumvent the disclosure regime.
The statute attempts to graft consumer‑style APR comparability onto commercial products that are structurally different. Projecting sales to produce an 'estimated term' and APR for sales‑based financing is inherently imprecise: small shifts in sales materially change repayment timing and therefore any APR calculated up front.
The opt‑in reporting pathway gives providers flexibility but creates a reliance on the commissioner’s judgment about what constitutes an 'unreasonable' deviation. That invites disputes about when forecast errors are ordinary business risk versus evidence of disclosure manipulation.
The bill’s mechanical assumptions (e.g., assuming maximum draw is taken for open‑end APRs or treating factoring as a single‑advance single‑payment APR under Appendix J) will produce APRs that are conservative and, in some cases, higher than market participants currently advertise. That makes comparison easier but risks misrepresenting borrower economics for products tied to variable revenue flows.
It may also push providers to restructure offers (fee timing, recourse, securities) to change how APR is computed or to fall back on exemptions (e.g., jurisdictional structuring, transaction size) where commercially viable. Finally, adopting regulations substantially similar to New York’s approach is efficient but risks mismatches: Maryland’s market mix and exclusion list differ, so NY‑style rules may not map cleanly without state‑specific tailoring.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.