Running a business in Texas just got a little more complex. On September 1, 2025, the state rolled out a new law (HB 700) that changes the way sales-based financing works for small businesses. If you’ve ever used merchant cash advances or other alternative financing options, this law could impact you directly. Let’s break it down in plain English so you know what to expect—and how Pumpkin Tax can help you stay compliant.
What Is Sales-Based Financing?
Sales-based financing is when a lender gives you money up front, and you agree to pay it back based on a percentage of your future sales. Think of it like an advance on your earnings—it can be helpful for businesses that need fast cash but don’t qualify for traditional bank loans.
For example: If you get a $100,000 advance, you might agree to pay back 10% of your monthly sales until the debt is cleared.
What HB 700 Means for Small Businesses
The new law was created to bring more transparency and fairness into these financing deals. Here’s what you need to know:
- Clear Disclosures Required: Any financing under $1 million now requires written disclosures. Lenders must spell out key details like total finance charges, repayment schedules, fees, and whether any collateral is required.
- Signed Agreement: The business owner (that’s you) must sign to confirm that you understand the terms.
- Registration Requirement: Financing providers and brokers must register with the state. While this rule doesn’t take full effect until December 31, 2026, it’s something to keep in mind if you’re working with a lender.
- Who’s Exempt? Banks, credit unions, and some licensed financial institutions don’t fall under this law.
Why This Matters
For small businesses, this law is a double-edged sword:
- Good News: You’ll get clearer, upfront information before committing to financing. No more confusing fine print.
- Challenge: You’ll need to pay closer attention to the paperwork and ensure that everything matches your business goals.
Non-compliance—whether from you or your financing partner—could create legal or financial headaches down the road.
How Pumpkin Tax Can Help
At Pumpkin Tax, we know that laws and regulations can feel overwhelming. That’s why we’re here to simplify it for you:
- Compliance Guidance: We’ll review your financing agreements and make sure they align with HB 700 requirements.
- Bookkeeping Support: Clear records are crucial. Our bookkeeping services keep everything organized so you’re ready for audits or reviews.
- Strategic Advice: We’ll help you evaluate whether sales-based financing is the best option—or if other financing methods would better serve your business.
Final Thoughts
Texas’ HB 700 law is designed to protect business owners, but it also adds another layer of responsibility. By staying informed and working with a trusted financial partner like Pumpkin Tax, you can navigate these changes confidently.
If you’re considering sales-based financing—or already have one in place—now is the perfect time to schedule a consultation with us. Let’s make sure your business not only complies with the law but also thrives financially.
Pumpkin Tax: Your partner in bookkeeping, payroll, and compliance—keeping your business future-proof.