What is a UCC Filing?
Learn what a UCC-1 filing is, how it affects your business, and what lenders do with these filings to secure their loans.
A UCC filing (specifically a UCC-1 financing statement) is a legal document that a lender files to publicly declare their security interest in your business assets. It serves as a notice to other creditors that those assets are pledged as collateral.
How UCC Filings Work
When you take a secured business loan, the lender files a UCC-1 with your state Secretary of State office. This filing describes the collateral securing the loan, whether specific assets (like equipment) or all business assets (a blanket lien).
The filing establishes priority. If you default and multiple creditors have claims, the one who filed first generally gets paid first from the sale of collateral.
Example
You take a $75,000 equipment loan to purchase a commercial vehicle. The lender files a UCC-1 listing that specific vehicle as collateral. If you default, the lender has a secured claim to repossess and sell the vehicle to recover their funds.
UCC Search
Before lending, most lenders run a UCC search to see existing liens on your business. Too many existing UCC filings can make it harder to get new financing because there may be no unencumbered assets left to secure the loan.
Types of UCC Collateral Descriptions
UCC filings describe collateral in different ways:
- Specific assets: Named equipment, vehicles, or property
- Category of assets: All inventory, all accounts receivable
- Blanket lien: All assets of the business, now and in the future
Impact on Your Business
UCC filings themselves do not hurt your business credit or operations. However, they can affect your ability to get additional financing since other lenders will see the existing claims.
When you pay off a loan, the lender should file a UCC-3 termination statement to release the lien. Always verify this happens; lingering UCC filings on paid-off loans can complicate future financing.
Checking Your UCC Filings
You can search UCC filings against your business through your state Secretary of State website. Many states offer free online search tools. Reviewing your filings periodically ensures there are no errors or outdated liens that should have been terminated.
UCC filings expire after 5 years unless the lender files a continuation statement. If a lender fails to renew, their security interest may lapse.
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Not Financial Advice: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. You should consult with qualified professionals before making any financial decisions.
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