| Disclosure law | In effect (since September 1, 2025); disclosures apply to specific offers of less than $1 million (§398.051) |
|---|---|
| Covers factoring? | No |
| APR in disclosure? | No, dollar figures |
| UCC filing office | Texas Secretary of State, UCC Section (filings submitted online through SOSDirect / SOSPortal) |
| State agencies pay | Overdue on the 31st day after the later of delivery, completion of services or receipt of the invoice; 46 days for political subdivisions whose governing body meets monthly or less often |
| Late-pay interest (state) | 1% plus the prime rate published in the Wall Street Journal, set annually |
| Lien deadline (private) | Commercial: lien affidavit by the 15th day of the 4th month after the claimant's last month of furnishing (3rd month on residential) |
| Public payment bond | Contracts over $25,000 (over $50,000 for municipalities) |
Who uses invoice factoring in Texas?
Texas receivables come from energy, petrochemicals, construction, logistics, healthcare and government. Oilfield service vendors in the Permian Basin and Eagle Ford bill large operators, and Gulf Coast refineries and chemical plants buy maintenance, turnaround and staffing services. The Port of Houston and inland distribution centers in Dallas-Fort Worth create freight-adjacent service invoices. Fort Hood, Fort Bliss and Joint Base San Antonio support defense contractors, and hospital systems in Houston's Texas Medical Center, Dallas and San Antonio buy staffing and facility services. Rapid commercial, data center and public construction keeps subs waiting on pay applications.
Energy customers often pay on net 60 to net 90 terms and route invoices through approval portals, which stretches cash cycles for small vendors. On private construction, owners generally have 35 days to pay after a payment request and contractors 7 days to pay subs. Government entities generally must pay within 30 days. Hurricane season and oil price swings can shift work volume quickly along the Gulf Coast.
- Industries that factor most: Oil and gas services, Petrochemicals and refining, Construction, Logistics and distribution, Healthcare services, Staffing.
- Metro areas: Houston, Dallas-Fort Worth, San Antonio, Austin, El Paso.
- Federal installations that buy from local firms: Fort Hood, Fort Bliss, Joint Base San Antonio, Naval Air Station Corpus Christi, Red River Army Depot.
What does Texas's commercial financing disclosure law require?
Commercial sales-based financing law, passed as HB 700 (2025) (Tex. Fin. Code §398.001 et seq.), has been in effect since September 1, 2025. It requires covered providers to give a written cost disclosure before a business signs. Scope: disclosures apply to specific offers of less than $1 million (§398.051).
It does not appear to reach invoice factoring transactions, though it covers other commercial financing.
It does not require an APR. Expect dollar figures instead: amount financed, amount disbursed, total cost and payment terms.
Registration: Providers and brokers of commercial sales-based financing must register with the Office of Consumer Credit Commissioner; existing businesses by December 31, 2026, renewed by January 31 each year
Exemptions: Banks, credit unions and their affiliates, Farm Credit lenders, real-estate-secured deals, leases, certain $50K+ motor vehicle dealer financing, and seller financing of the provider's own products
Enforcement: Consumer Credit Commissioner, with civil penalties up to $10,000 per violation; the chapter creates no private right of action
The law covers financing repaid as a percentage of sales or revenue (including fixed payments with a true-up), not a purchase of specific invoices, so ordinary invoice factoring is outside it. It also bars automatic debits unless the provider holds a perfected first-priority security interest, and voids confessions of judgment.
Compare offers side by side in the proposal decoder, and see every state's law in our disclosure law tracker.
How do UCC filings work in Texas?
Where UCC-1s are filed in Texas: Texas Secretary of State, UCC Section (filings submitted online through SOSDirect / SOSPortal). Online searches cost $1 each, paid before searching; fixture and as-extracted collateral filings go to the county clerk where the real property is recorded.
A factor will search that index on your exact legal name before it funds, and will file its own UCC-1 on your accounts receivable at closing. Anyone already claiming your receivables, such as a bank, an SBA lender or a merchant cash advance provider, must release, subordinate or sign an intercreditor agreement first. Search your own name first at the official Texas UCC search; old filings from paid-off lenders are common and can take a week or more to terminate. More in UCC liens and intercreditor agreements.
How fast do government payers in Texas pay?
Texas state agency deadline (Tex. Gov't Code ch. 2251): Overdue on the 31st day after the later of delivery, completion of services or receipt of the invoice; 46 days for political subdivisions whose governing body meets monthly or less often. Late interest: 1% plus the prime rate published in the Wall Street Journal, set annually. Applies to state agencies and political subdivisions for goods and services. A vendor must pay its subs within 10 days after receiving payment, and subs pay suppliers on the same 10-day clock.
Federal agencies follow the Prompt Payment Act: generally 30 days after a proper invoice, with interest at the Treasury rate (4.75% for July 1, 2026 to December 31, 2026) when they pay late. To factor federal invoices, the funder usually needs an assignment of claims acknowledged by the contracting officer, which adds a week or two to setup. See factoring for government contractors and the prompt payment interest calculator.
What do Texas lien and prompt pay rules mean for construction factoring?
Funders that factor construction receivables check lien and bond rights before they advance on a pay application, because those rights are what get an unpaid sub paid. Described generally:
- Mechanics lien deadline (private work, Tex. Prop. Code ch. 53 (as amended by HB 2237 for original contracts on or after January 1, 2022)): Commercial: lien affidavit by the 15th day of the 4th month after the claimant's last month of furnishing (3rd month on residential). To enforce: Generally within 1 year after the last day the claimant could file its lien affidavit, extendable by written agreement but not beyond 2 years after filing.
- Preliminary notice: Subs and suppliers must send notice to the owner and original contractor for each unpaid month: by the 15th day of the 3rd month after the month of furnishing on commercial jobs, or the 2nd month on residential jobs.
- Private prompt pay (Tex. Prop. Code ch. 28): owner to contractor: 35 days after the owner receives a written payment request; contractor to sub: 7 days after the contractor receives the owner's payment; late interest: 1.5% per month starting the day after payment is due.
- Public projects (Tex. Gov't Code ch. 2253): you cannot lien public property, so payment bonds take its place. Bond required: Contracts over $25,000 (over $50,000 for municipalities). Claim notice: First-tier claimants notify the prime and surety by the 15th day of the 3rd month after each month of unpaid work; second-tier claimants must also notify the prime by the 15th day of the 2nd month; suit no earlier than 61 days after notice and within 1 year after notice is mailed.
- Read every lien waiver before you sign it, and ask counsel how a waiver signed before payment affects your rights. More in factoring for construction subcontractors.
What else should a Texas business know?
- HB 700 registration with the Consumer Credit Commissioner is due by December 31, 2026 for sales-based financing (MCA) providers and brokers; a business comparing an MCA with factoring should know only the MCA side is regulated.
- Texas lien notices run on a monthly calendar (15th of the 3rd month on commercial jobs), and funders often ask subs for proof the notices went out before advancing on slow pay applications.
Questions people ask
Is invoice factoring legal in Texas?
Yes. Factoring is a sale of accounts receivable under Article 9 of the Uniform Commercial Code as adopted in Texas. The factor files a UCC-1 with the Texas Secretary of State to perfect its interest. Texas licenses consumer lenders and now registers sales-based financing providers, but a true sale of business invoices is a commercial transaction outside those regimes.
Does Texas HB 700 apply to factoring?
Generally no. HB 700 (Finance Code chapter 398, effective September 1, 2025) covers commercial sales-based financing, meaning advances repaid as a percentage of sales or revenue, like merchant cash advances. Providers must register with the Consumer Credit Commissioner by December 31, 2026 and give cost disclosures on offers under $1MM. Purchasing specific invoices is not sales-based financing.
Where do I search for UCC liens in Texas?
Search through the Texas Secretary of State's SOSDirect (SOSPortal) system, which charges $1 per search, paid before you run it. Search your exact legal name and any trade names. Fixture filings are recorded with the county clerk instead. Any lender with a blanket lien on accounts must release or subordinate before a factor takes first position.
How fast must Texas government entities and contractors pay?
Under Government Code chapter 2251, a payment from a state agency or political subdivision generally becomes overdue on the 31st day after the later of delivery or receipt of the invoice, with interest at prime plus 1%. A vendor must pay its subs within 10 days after it is paid. On private jobs, owners have 35 days and contractors 7 days.
How fast can a Texas business get funded by factoring?
With a clean file (current AR aging, invoices, a clear UCC search and creditworthy customers), first funding commonly takes about one to three weeks, and later invoices usually fund within a day or two of verification. Federal receivables take longer because of the assignment of claims.
Sources
- Texas Legislature, HB 700 enrolled text (Finance Code chapter 398)
- Venable, State commercial financing disclosure laws (March 2026)
- Texas Secretary of State, UCC FAQs
- Levelset, Texas prompt payment FAQs
- Levelset, Texas mechanics lien FAQs
- Levelset, Texas bond claim FAQs
General information, not legal advice. Statutes and deadlines change and have exceptions; check the source or ask counsel before relying on one. Spot an error? Tell us and we will fix it.