CASH Act
The Capital Access for Small Businesses Harmonization Act (CASH Act) would require factoring providers to clearly disclose key terms to small business concerns before they enter into a factoring facility agreement, but only in cases where the total factoring transactions authorized under the agreement are, or are reasonably believed to be, less than $500,000. The disclosure must cover the discount on the face value of sold accounts, all fees, any reserve terms, the duration of the facility, and a concrete example using a $10,000 face-value transaction that demonstrates the financial impact on the small business. The bill also establishes an explicit federal preemption of state or local requirements that would add to or conflict with these disclosures, and includes definitions for terms like “factoring transaction,” “provider,” and “reserve.” It does not require disclosures for modifications to existing facilities. The purpose appears to be increasing transparency and protecting small businesses from opaque or surprise terms in smaller factoring arrangements.
Key Points
- 1Before entering a factoring facility agreement for small business concerns, providers must give written disclosures if the expected or authorized aggregate factoring is under $500,000.
- 2Required disclosure contents include: (1) the difference between face value and the amount paid to the small business, (2) all fees, (3) reserve amounts/terms, (4) the duration of the facility, and (5) a $10,000 example illustrating these elements in a factoring transaction.
- 3The example must show the discount/amount paid, applicable fees, maximum reserve, and net payment to the small business for a $10,000 face-value claim.
- 4The act creates federal preemption, barring states from adding requirements or creating inconsistencies with these disclosures.
- 5Modifications to existing factoring facility agreements are exempt from disclosure obligations under the bill.