A member of the New York Senate introduced himself on January 6th S1061, which would update the New York Banking Act (the “Act”) to require a license for any person or entity that manufactures or solicits a “commercial finance product” in New York. Legislation defines a commercial finance product as “any prepayment of funds to a trading or business enterprise made to assist the business in meeting its capital needs,” including (i) loans to a trading company of US $ 500,000 or less; (ii) Asset-Based Financing of US $ 500,000 or less; and (iii) leasing transactions of US $ 500,000 or less.

“Make or Advertise” includes:

  • Providing commercial finance products to small businesses;
  • Marketing of commercial finance products for commercial finance product providers;
  • Receiving compensation from a commercial finance product provider in return for a transfer; and
  • A company that works with an originator of a Bundes- or Landesbank organization and the company: (i) acquire a stake in the commercial finance product if the company either (a) receives compensation from the originator or (b) operates the commercial finance product; ; or (ii) provides the originator with compensation or loss protection for losses that the originator may incur as a result of the performance of the commercial financing product.

The legislation would exempt banking organizations as defined by the law (all banks, trust companies, private bankers, savings banks, custodians, savings and credit associations, credit unions and investment companies) as well as any lender who conducts or requests five or fewer commercial transactions from tax financing of products within a 12 month period and reviewing Casher licensees among others. In particular, the legislation does not currently provide for changes to the existing Section 340, Article 9 of the Act, which generally requires a license to make commercial loans in New York of $ 50,000 or less at an interest rate of over 16 percent.