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Senate committee advances bill to define revenue-based financing, senators ask for consumer guardrails
Summary
House Bill 470, which defines and authorizes revenue-based financing for small and medium-sized businesses, was reported favorably after lawmakers pushed the sponsor to consider amendments adding consumer safeguards and disclosure requirements.
The Senate Committee on Commerce reported House Bill 470 favorably Wednesday after extended questioning about consumer protections and regulatory guardrails.
Representative McFarland told senators the bill defines "revenue-based financing," a product in which a provider supplies working capital in exchange for a contractual share of a business’s revenue rather than a fixed loan repayment. Katherine Fisher, an attorney representing the Revenue Based Finance Coalition, said providers deploy roughly $23 million a year to Louisiana small and mid-sized businesses and that the product is used to smooth working capital needs without personal guarantees.
Senators raised concerns about potential gaps in consumer protections and how a revenue-based arrangement could be structured to resemble a loan while avoiding interest-rate limits and disclosure regimes. Senator Barriss asked whether the product avoids personal guarantees; Fisher said personal guarantees generally are not part of revenue-based financing, noting the transaction is nonrecourse and tied to revenue performance.
Senator Morris and others pressed the sponsor to consider amendments that would add explicit guardrails — for example, disclosure requirements, registration, or limits to prevent the product from being transformed into a high-cost loan in form. Representative McFarland said he would work with senators and review similar statutes in other states.
Witnesses noted nine states have statutes or regulatory frameworks addressing sales- or revenue-based financing with various approaches, including disclosures and registration. The committee moved the bill favorably but several senators signaled they will seek amendments on the floor to add transparency and anti-evasion protections.
Sponsors said the goal is to increase financing options for small businesses while guarding against abusive structures and opaque pricing. The bill advances to the Senate floor with a request to the sponsor to confer with committee members on potential guardrails.
