If you’ve just been served with a UCC lien, you’re probably spiraling right now. What does this mean for the business? Who do I talk to? We are Delancey Street, a business debt settlement company that negotiates with merchant cash advance funders and lenders for owners. This post will explain what a UCC lien is and how to get one removed.
A Financing Statement
If you’ve heard about a UCC lien, that’s just another name for a UCC filing. It’s a financing statement. A lender can put it up with your secretary of state to show they have a claim against whatever you pledged. A UCC-1 can be a blanket UCC filing, securing all your business assets, or it can be specific to particular assets, like equipment, a vehicle, or property.
A UCC-1 can be listed on your business credit report. If you’re behind on an MCA, don’t assume a UCC lien is just paperwork for the funder. It is a public record, and it secures the funder’s interest for five years unless they refile. A new lender may see it when you apply for financing, even if it isn’t on your business credit reports. The lien can follow the business while you work through the debt.
A UCC lien gets filed when you receive a business loan or financing. The specific language and collateral used in the UCC-1 varies depending on the type of funding. Many unsecured business loan companies file blanket liens against business assets. It might seem odd, but even in default of an unsecured business loan, the funding is still an unsecured obligation. In other words, the lender cannot use a UCC-1 lien to pierce the corporate veil to reach personal assets. A UCC-1 creates a lien against the business and one or more of its assets.
Filling out a UCC-1 financing statement doesn’t require much information. Here’s an example from the New York Department of State. You only need the debtor’s name, any additional debtors, information about the debtor’s organization, the debtor’s address, the secured party’s information, and a list of the collateral named in the financing agreement.
When a lender files a UCC lien, they’re basically putting a claim on something you own to make sure they get paid. The trick is, they can put it on a lot of different things. The easiest way to think about it is as collateral, which you probably already understand. If they can use it as collateral for a loan, they can usually put a UCC lien on it. That means real property, equipment, inventory, vehicles, accounts receivable. If any of those secure a loan, the lender may file a UCC lien on them.
Go Read It First
If you’re going to call somebody about a UCC filing, go read it first. You don’t need to understand every detail, but look at the debtor’s name and any extra debtors. Make sure your business name and address are right. Then see who the secured party is and read the collateral description. Is it one piece of equipment or a vehicle, or is it a blanket lien listing all your assets? And check the filing date, because it doesn’t last forever, but it lasts for five years unless they refile.
Get a UCC Lien Removed
The easiest way to get a UCC lien removed is to pay the loan in full. Of course, many small-business owners don’t have that money lying around. But once you’ve paid it off, you can request that the lender release the lien. If you can’t pay in full, you may be able to negotiate with the lender. Maybe they’ll let you stretch the loan out longer or lower the interest rate, or they’ll make other changes so it’s easier to pay off.
That’s where Delancey Street comes in. Many owners who owe on a merchant cash advance can’t afford to pay the full balance in one lump sum. So the realistic path is negotiating with the funder. Our senior advisors negotiate with MCA funders and lenders for less than the full balance owed. We don’t sell you another loan. We also handle stacked advances, SBA loans, equipment finance, lines of credit. We founded Delancey Street out of our experience as debt relief professionals and former merchant cash advance industry executives. Based in New York City, we serve business owners in 49 of the 50 states.
Another way to take a UCC lien off your business is by filing for bankruptcy. But that will damage your business credit score. If you go this route, hire an experienced lawyer who can guide you through the process and make sure every necessary step is taken to remove the lien. We’re not a law firm. If bankruptcy makes more sense than negotiating, we’ll tell you straight up and connect you to a vetted independent attorney, maybe Subchapter V bankruptcy counsel. The attorney-client relationship is between you and that attorney, and if there’s a cheaper route, we point you to it on the first call.
If you see UCC liens on your business credit reports, you can dispute inaccuracies. This includes wrong dates, incorrect loan amounts, or anything else that doesn’t add up. It’s also a good idea to check if the lien has been released already. If it has, make sure your credit reports update to show that status.
A UCC lien doesn’t have to stay a mystery. Find out what was pledged, look up the filing, and check your credit reports. The first consultation with Delancey Street is free and confidential. Our fee is one percentage of total enrolled debt, quoted in writing before any work begins.
