DLS staff briefs Virginia ULC commissioners on 2026 commercial financing disclosure draft

A Division of Legislative Services presentation Tuesday outlined the 2026 Uniform Law Commission draft on commercial financing disclosures intended to help small merchants compare lending products and providers.

Lucas Childers, a DLS staff attorney, said the draft aims “for merchants to be able to compare different types of lending products,” applying to business transactions of $500,000 or less. The draft groups products into closed‑end/open‑end loans, factoring, and revenue‑based financing and proposes a one‑page “safe harbor form” listing material terms.

Childers said the draft’s most contested feature is an estimated percentage rate (EPR) intended to approximate cost across product types. He cautioned that calculating an EPR for factoring or revenue‑based financing requires assumptions about collection rates or projected revenues and could mislead some merchants: “If you borrow $100,000 and pay back $120,000 in six months, that looks like a 40% APR; if paid over two years, it looks like 10%,” he said.

The 2026 draft also tightens disclosure timing (replacing last year’s broad “offer time” with a narrower “disclosure time”), increases penalties for enforcement (up to $10,000 per violation with caps), narrows cure provisions and expands definitions (including cryptocurrency as a fund). Commissioners pressed staff on whether the EPR is an improvement over existing Virginia law, which covers only revenue‑based financing; Childers said the answer depends on policy priorities—more information helps deter predatory actors but also risks overloading merchants with technical figures.

An informal session on the draft was scheduled for mid‑June, and staff said the drafters would continue to refine timing and calculation rules before the ULC annual meeting.