Texas Businesses Need to Know About HB 700 and Revenue-Based Financing Reform
Published: June 2025
Introduction
Texas House Bill 700 (HB 700) has passed and is waiting on Governor Abbott’s final decision. If signed—or left unsigned—the bill will become law on September 1, 2025. This legislation has major implications for small businesses and funding companies operating in the state, especially those involved in merchant cash advances and revenue-based financing.
This post breaks down exactly what HB 700 includes, why it matters, and what you should do now to prepare.
What Is HB 700?
HB 700 is a law designed to regulate commercial financing transactions under $1,000,000, specifically revenue-based financing (RBF), also known as merchant cash advances (MCA).
While its intent is transparency, many provisions create operational and compliance challenges for funders, brokers, and small business borrowers.
Key Provisions of HB 700
✅ Detailed Disclosures Required Lenders must disclose:
- Total financing amount
- Amount disbursed
- All fees and charges
- Estimated repayment amount
- Term type (fixed vs. variable)
- Prepayment terms and penalties
- Broker compensation
✅ Broker Registration Required By January 1, 2026, brokers must register with the Texas Department of Banking to legally operate under the new guidelines.
✅ Confession-of-Judgment Clauses Banned The law prohibits funders from using confession-of-judgment language, a common legal tool for enforcing repayment.
✅ Penalties for Noncompliance Violators could face civil penalties of up to $10,000 per violation, capped at $100,000 total.
✅ Exemptions HB 700 does not apply to:
- Banks and credit unions
- Farm credit lenders
- Real estate-secured deals
- Vehicle financing over $50,000
Why This Matters
While added transparency can help borrowers, the law also imposes strict operational rules that may discourage non-bank lenders from working in Texas.
One concern is the requirement for a perfected security interest in business property when automated daily or weekly payments are involved. That’s uncommon in RBF and adds a layer of complexity and cost that many funders may choose to avoid.
The result? Fewer funding options for small businesses in Texas—and longer turnaround times.
What Business Owners Can Do Now
🗓️ Governor Abbott has until June 22, 2025 to veto the bill. If he does not sign or reject it by then, it will become law automatically.
🔗 To take action, small business owners and stakeholders can use this tool from the Revenue Based Finance Coalition: 👉 https://www.votervoice.net/RBFC/campaigns/127462/respond
This page allows you to send your concerns directly to the governor and lawmakers.
Final Thoughts
Revenue-based financing has been a lifeline for businesses that don’t qualify for traditional bank loans. HB 700 may significantly reduce that access.
Whether you’re a borrower, broker, or lender, now is the time to speak up.
If you’re unsure how this affects your business or need help adjusting your funding strategy, reach out to Small Business Lending Source for guidance.
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