4 Ways to Find Every UCC Filing Against Your Business

You’re an owner behind on your payments, and every time you try to get a new lender, you hear “no, no, no.” Here’s a hint: Before a lender issues you a secured loan, it does a lien search, looking for UCC-1s (Uniform Commercial Code financing statements). If a lender wants to secure a loan with a collateral asset, the lender files a UCC-1 to “perfect” its interest in the asset. This is how a lender establishes priority over a particular asset in the event of a default or a bankruptcy. A UCC-1 filing acts as public notice of a lender’s interest in certain or all assets of a business. All lenders across the country use the same UCC-1 form. It’s a good idea for you to know what the lender is going to find before the lender does.

The UCC-1, or Financing Statement

The UCC, or Uniform Commercial Code, is a set of uniform rules intended to smooth the way for business transactions between businesses in the 50 states and U.S. territories. The important form for you, as a small-business owner, is the UCC-1, or financing statement. It’s important to realize that more than one lender can make a filing on your collateral. The filing with the earliest date and time stamp takes priority (first position). Lien priorities are established by the date and time the filing arrives at the Secretary of State’s office. Lenders will generally request to be in the first position unless otherwise negotiated. The lien can be filed on one particular piece of equipment, such as a piece of machinery identified by its serial number, or it can be a blanket lien, filed on all of the company’s collateral.

Here’s an example that shows you why: The SBA routinely requires a blanket lien. And if accounts receivable are covered by the blanket lien, you can’t get a second loan for working capital. The SBA doesn’t allow for much working capital, meaning that often you’ll get long term assets funded but not working capital. If you need a loan for working capital, then the SBA would have to agree to subordinate its interest in the receivables so the new lender could claim first position on that portion. Getting existing lenders to subordinate can be a long, frustrating process.

If you have an old blanket lien on your receivables or your equipment, then that new lender may not be able to help. Knowing precisely what is on file means that you see your business the way a lender does. You can spot filings that should have been released, and you know which lenders to speak to first. Here are four ways to find them all.

Search for Filings

The first way: search the office of the secretary of state for the state where your business is located. That’s where UCC-1’s are generally filed. All information on a UCC-1 is public. Many states have Internet sites where you can search UCCs for a small fee. OK, for each filing listed on that state site, you want to note: the name of the secured party, the filing date and time (that determines the priority), whether it’s for a specific asset or a blanket filing, and which of your company names it is filed under. Just make a simple chart. Print or save the filings.

Here’s a second option: Don’t forget other states. A UCC-1 can be filed in more than one state, say if a business is near a state border or has operations in multiple states. Make sure you search for filings in any states where you have a location or are adjacent to the border.

The third way is to search every name. Many financing statements will list both the company’s formal name, any d/b/a name and the primary guarantor of the loan. The primary guarantor could be you personally, which means searching by your own name. If you do business under any other names (d/b/a names), search those too. If your company is the owner or has an interest in any other entities, search those names. Why? Because a financing statement filed by a parent company might name all its subsidiaries. There’s also the possibility of a UCC-1 being assigned or amended if the loan has been sold to a new lender or your original lender was acquired.

The fourth way: Poke around your own paperwork. A UCC-1 can be filed without your signature. Some banks and finance companies bury language in their applications that, when you sign as a company officer, says they can file a UCC just because you applied. So if you didn’t go with that lender, you may still have a filing out there and you might have to pay fees to release it. Did you shop for money and fill out several applications in the process? Then you may have had to sign something at one of those other institutions that gave it the right to file just because you applied. Go back and examine all those applications you signed, and read the fine print. Any lender whose money you didn’t end up taking would be another one to look for on the state search.

And finally, sometimes, you pay a loan off — and when you do, it’s up to you to ask your lender to terminate their UCC-1 on your company. You should do it as quickly as possible. If your lender gets merged or sold, good luck finding your records and getting the successor lender to search through its records and terminate your orphan UCC — on a loan you paid off.

And now you have a clear picture of what a new lender would see. Going forward: make sure you read the fine print and don’t let a potential lender file a UCC-1 until you have a deal to use it. If you need both equipment financing and working capital, generally it’s best to negotiate for both upfront and make sure the two lenders are OK with each other. And get terminations of loans you have paid off.