Education only, not legal advice. Rules vary by state and change often. This lesson reflects public sources as of ; confirm every requirement with your own counsel and the regulator before relying on it.
The rule in one paragraph
Section 5 of the Federal Trade Commission Act prohibits unfair or deceptive acts or practices in commerce. It is not limited to consumers: the FTC has used it against companies marketing and collecting on financing to small businesses, including merchant cash advance providers. Every state also has its own unfair and deceptive practices law (often called a UDAP or "little FTC Act"), enforced by the attorney general and sometimes by private lawsuits. Commercial financing disclosure laws in several states add specific bans on false or misleading statements by brokers.
The test regulators apply is roughly this: would the claim mislead a reasonable business owner about something that matters to their decision? The fine print does not rescue a headline that says the opposite.
Claims to avoid, and what to say instead
| Avoid | Why it is a problem | Say instead (when true) |
|---|---|---|
| "No credit check" | Most funders pull the owner's credit, often after the application. If anyone pulls it, the claim is false. | "Approval is based mainly on your business's bank deposits; a credit check may be part of the review." |
| "Guaranteed approval" or "everyone qualifies" | Nobody can guarantee a funder's decision, and declines are common. | "We submit to several funders to find the best fit for your file." |
| "Lowest rate" or "best rates in the industry" | You cannot prove it, and it changes deal by deal. | "We compare offers from multiple funders so you can choose." |
| "Funds in 24 hours" as a promise | Funding speed depends on documents, verification and the funder. | "Some files fund within a day or two once documents are complete." |
| Quoting a factor rate as an interest rate ("only 20%") | A 1.20 factor over six months costs far more than 20% a year. | State the dollar cost: "You receive $50,000 and pay back $60,000." |
| Calling an advance a "loan", or a loan an "advance" | Misstates what the merchant is signing and which rules apply. | Use the product's real name and explain it. |
| Implying you are the funder | Merchants are entitled to know who provides the money and who is the broker. | Say you are a broker who works with several funders. |
| Mailers styled as government notices or "pre-approved" offers | Creates a false impression of urgency or approval. | Plain mail that says who you are and what you offer. |
Stating cost honestly
Misstated cost is the complaint regulators see most. Work in dollars, and show the numbers the merchant will see on the disclosure:
payback = advance x factor rate cost in dollars = payback - net funding
Example: a restaurant is offered $50,000 at a 1.30 factor with a 3% origination fee. Payback is $50,000 x 1.30 = $65,000. The fee is $1,500, so net funding is $48,500. The cost in dollars is $65,000 - $48,500 = $16,500. Saying "it costs $16,500 to receive $48,500" is honest. Saying "30%" without a time frame is not, and if the merchant is in a disclosure state, every number you say should match the provider's disclosure.
Practical habits
Checklist
0 of 7How the CRM helps
Ferrylend's offer calculator works out payback or total repayment, net funding, payment, total cost and an APR estimate from the offer's terms, for advances and loans alike, so the numbers you present come from the offer itself rather than memory (the APR estimate is for comparison and is not a disclosure APR), and comparing offers side by side keeps the conversation in dollars. Notes and the deal timeline record what was presented and when. The free factor rate calculator shows the same math for anyone.
Questions
Does the FTC Act apply to small business financing?
Yes. Section 5 of the FTC Act prohibits unfair or deceptive acts or practices in commerce generally, not only toward consumers, and the FTC has brought cases over the marketing and collection of financing to small businesses. State unfair and deceptive practices laws apply as well.
Can I advertise "no credit check" for an MCA?
Only if it is literally true for every deal you advertise it on. Most funders review the owner's credit at some point, so the claim is usually false. Describe what the decision is mainly based on instead, and have counsel review the wording.
Sources
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Related lessons
- Sales and merchant conversationsPresenting offers honestlyShow the merchant total payback, the payment and its share of revenue, the term and the cost in dollars, side by side, with a worked three-offer comparison.
- Sales and merchant conversationsHandling common objections honestlyHonest answers to "it's too expensive", "my bank will do it", "I need to think about it" and "I already have a broker", without pressure or spin.
- Merchant cash advance 101Factor rates and payback math, worked throughHow factor rate, payback, payment, holdback and estimated term fit together, with worked examples, and why an APR-style estimate is tricky but often required.
- Compliance basicsState commercial financing disclosure lawsWhich states require commercial financing disclosures as of October 2026, what the disclosure shows, and what providers and brokers are each responsible for.