MCA Laws in Virginia: What Business Owners Need to Know
Virginia has joined a small but growing group of states that have passed commercial financing disclosure laws targeting MCA companies. If you are a Virginia business owner, you now have stronger protections than most states when it comes to understanding the true cost of a merchant cash advance.
This guide covers Virginia's MCA regulations, your rights as a business owner, and what to do if you are considering or already in an MCA agreement.
Current MCA Regulations in Virginia
Virginia passed its Commercial Financing Disclosure Law, requiring MCA providers and other commercial financing companies to provide standardized disclosures to small businesses. This places Virginia alongside New York and California as one of the few states with meaningful MCA transparency requirements.
Disclosure Requirements
Under Virginia's commercial financing disclosure law, MCA companies must provide the following information before a transaction is finalized:
- Total amount of financing. The exact amount the business will receive.
- Finance charge. The total cost of the financing expressed as a dollar amount.
- Estimated annual percentage rate. An APR calculation that lets you compare the cost of an MCA to traditional financing.
- Payment schedule. The amount and frequency of payments.
- Prepayment terms. Whether early payoff reduces the total cost.
- Collateral requirements. Any personal guarantees or liens required.
These disclosures must be in writing and provided in a clear, standardized format. The goal is to eliminate the confusion that MCA companies create by using factor rates and other non-standard pricing methods.
Confession of Judgment Rules
Virginia law restricts the use of confessions of judgment. Under Virginia Code Section 8.01-433, a COJ must meet specific requirements to be valid:
- The debtor must sign the COJ voluntarily
- The COJ must be properly authenticated
- Virginia courts can review and vacate COJs that were improperly obtained
Virginia does not provide as strong a prohibition as Texas (which bans COJs entirely), but the state's courts have been willing to scrutinize COJs in commercial financing disputes. If an MCA company files a COJ against a Virginia business, the business owner has grounds to challenge it through the court system.
If a COJ judgment was obtained in another state, Virginia courts will review the judgment before domesticating it. This review provides an opportunity to raise defenses that you may not have had in the original court.
UCC Filing Rules
MCA companies file UCC-1 financing statements with the Virginia State Corporation Commission. These filings are standard practice and create a lien against your business assets and future receivables.
What Virginia business owners should know:
- Search for UCC filings through the Virginia State Corporation Commission website
- Virginia UCC filings are effective for five years
- After satisfying your MCA obligation, demand a UCC-3 termination in writing. The funder must file it within 20 days.
- Virginia's version of UCC Article 9 provides remedies if a funder wrongfully maintains a lien after the obligation is satisfied
Consumer Protection Laws That Apply
Virginia Consumer Protection Act (VCPA)
The VCPA (Virginia Code Section 59.1-196 et seq.) prohibits deceptive business practices. While it primarily targets consumer transactions, certain provisions can apply to MCA transactions, particularly when the business owner is in a position similar to a consumer.
If an MCA company misrepresented the terms, hid fees, or engaged in deceptive marketing, the VCPA may provide a remedy including actual damages and attorney fees.
State Corporation Commission Oversight
The Virginia State Corporation Commission (SCC) has regulatory authority over financial services companies operating in Virginia. MCA companies that offer financing to Virginia businesses may be subject to registration or licensing requirements under the SCC.
If you believe an MCA company is operating improperly in Virginia, filing a complaint with the SCC is an important step.
Recent Legislation and Court Cases
Virginia's MCA regulatory environment is evolving:
- Disclosure law implementation. The SCC has been working on implementing regulations for the commercial financing disclosure law, establishing the specific format and content of required disclosures.
- Enforcement activity. The Virginia Attorney General's office has received complaints related to MCA practices and has indicated willingness to investigate patterns of deceptive conduct.
- Industry registration. Virginia has moved to require certain commercial financing providers to register with the SCC, increasing regulatory visibility into MCA activity in the state.
- Judicial scrutiny. Virginia courts have followed the national trend of examining whether MCAs with fixed payments and no reconciliation are actually loans subject to usury limits.
What Virginia Business Owners Should Do
- Demand disclosures. Virginia law requires MCA companies to provide standardized disclosures. If a funder refuses, that is a violation of state law and a major red flag.
- Use the APR to compare options. The required APR disclosure lets you directly compare an MCA to SBA loans, bank lines of credit, and other financing. MCAs almost always cost more.
- Review the COJ clause. If the MCA agreement includes a confession of judgment, understand your rights under Virginia law and consider having an attorney negotiate its removal.
- Monitor your UCC filings. Check the Virginia SCC website for liens against your business.
- Report violations. If an MCA company fails to provide required disclosures or engages in deceptive practices, file a complaint with the Virginia Attorney General and the SCC.
Helpful Resources
- Virginia Attorney General for consumer and business protection
- Virginia State Corporation Commission for financial regulation
- SBA Richmond District Office for alternative financing resources
- Virginia Small Business Development Centers for free business counseling
Related Resources
- What Is a Merchant Cash Advance? — understand how MCAs work before diving into the legal details
- MCA Laws by State — see how your state compares to others
- MCA Contract Red Flags — 8 warning signs in MCA contracts
- MCA Confession of Judgment — the most dangerous clause in your contract
- MCA Cost Calculator — calculate the true cost of any MCA offer
Frequently Asked Questions
Does Virginia require MCA companies to disclose the APR?
Are confessions of judgment enforceable in Virginia?
Do MCA companies need a license to operate in Virginia?
Where do I file a complaint against an MCA company in Virginia?
Sources
- Virginia State Corporation Commission. Financial regulation and commercial financing oversight.
- Virginia Attorney General. Consumer and business protection.
- SBA Richmond District Office. Federal small business resources for Virginia.
- Virginia Small Business Development Centers. Free business counseling and resources.