Kansas Introduces New Commercial Financing Disclosure Law – Financial Services

On April 17, the Kansas Legislature signed SB 345, to become the most recent state to
enact disclosure requirements for small business lenders.

The law’s requirements apply to “providers” which
are defined as persons who consummate more than five commercial
financing transactions with businesses located in Kansas in a
calendar year. Before consummating a commercial financing
transaction, the bill would require providers, for every commercial
financing transaction, to disclose to the debtor business:

• The total amount of funds provided under terms of the financing
  agreement;




• The total amount of funds disbursed (if different amount of
  funds provided);




• The total amount to be paid to the provider;




• The total cost of the financing (determined by subtracting the
  funds disbursed from the total amount of payments);




• The manner, frequency and amount of each payment or, if
  payments will vary, the initial payment; and




• A statement of whether there are any costs or discounts
  associated with prepayment of the loan, including a reference to
  the section of the financing agreement that grants the debtor the
  right to prepayment.




• The bill does have two important exemptions. Financing
  transactions of less than $500,000 are exempt from the law’s
  requirements. Moreover, online lending platforms facilitating the
  extension of commercial credit through a depository institution
  licensed in the state are also exempt.

The law takes effect on July 1, 2024.

Putting It Into Practice: Kansas enacts this
bill in the wake of a growing number other states introducing their
own commercial financing disclosure laws (see our previous posts on
such laws here, here, here and here). Disclosures required under the laws of
other states do differ to varying degrees from the above Kansas
law. To the extent that state commercial financing disclosures are
not uniform, small business lenders would be wise assess whether
individualized disclosures for each state in which they operate
makes sense.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.