Texas Governor Greg Abbott signed House Bill 700 (Texas HB 700) into law on June 20, ushering in significant regulatory changes to how sales-based financing is offered to small businesses.
As the new law takes effect on September 1, 2025, 1West—a leading fintech platform for small business capital—is raising urgent concerns about its implications for thousands of entrepreneurs across Texas.
Texas House Bill 700 (HB 700) amends Title 5 of the Texas Finance Code. It introduces new disclosure requirements for certain commercial sales-based financing transactions and mandates the registration of brokers and providers involved in these arrangements.
Modeled after similar laws in other states, HB 700 adds compliance hurdles for sales-based financing products such as merchant cash advances (MCAs) and revenue-based loans. It also restricts the use of automated bank debits, making it more difficult for revenue-based financing providers to operate in Texas.
Passed by the Texas Legislature, HB 700 is designed to prohibit unfair and abusive credit practices and ensure fees are transparent. However, critics warn it could also limit funding options for smaller businesses.
Kunal Bhasin, founder and CEO of 1West, says the impact will be felt immediately.
“It affects our customers and all small businesses in Texas who have already entered into revenue-based financing agreements,” says Bhasin. “When these customers come back to refinance their agreements past September 1, they will come to find that the options they are generally accustomed to are no longer available for them.”
Designed to enhance transparency and consumer protection, HB 700 requires providers and brokers of sales-based financing to register with the Texas Office of Consumer Credit Commissioner.
However, the most controversial provision prohibits automatic debits unless the lender obtains a first-priority security interest—a requirement that is rarely feasible. This effectively limits the use of ACH payments and could result in a ban on many MCAs and similar products.
“The small business owners in Texas will have to look for alternative types of financing. Many will no longer qualify for credit at all,” Bhasin cautions. “This will disproportionately affect the very small businesses under $1 million in the state of Texas.”
Under Texas HB 700, providers offering commercial sales-based financing under $1 million must disclose specific details, including the financing amount, disbursement, finance charges, repayment totals, payment terms, fees, and any applicable collateral or security interests.
As other states observe Texas’s regulatory model, Bhasin urges policymakers to carefully consider the trade-offs.
“Hard to say if other states will follow suit at this time,” he says. “While regulation is welcomed and certainly needed in the small business financing space, I hope as other states roll out their regulations that they put thought into not affecting the access to credit that small businesses use as a lifeline.”
To help its clients prepare, 1West has already begun outreach to affected business owners.
“At 1West, we have begun the process of notifying our customers of the new rule and changes that are set to take place on September 1,” Bhasin shares. “We are working with our small business customers to ensure they understand the mechanics of the rule change. For those that are eligible, we are offering to refinance their existing financing into products that they will be able to continue with for the long term, even after the rule change.”
Industry leaders warn that the new HB 700 law in Texas will reduce access to flexible capital, lead to job stagnation, and slow growth for one of the country’s most entrepreneurial regions. More than a compliance issue, Texas HB 700 serves as a wake-up call for business owners statewide.
With the law’s effective date fast approaching, small business owners are being urged to consult with financial professionals and explore their options now.
1West is here to help you navigate the impact of Texas HB 700 and explore funding solutions that still work for your business. We’ve already begun reaching out to clients, offering refinancing options and personalized guidance to ensure you’re set up for long-term success—before and after the new rules take effect.Contact us today or call to speak with a dedicated funding advisor.
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