How does a UCC filing affect my trucking company when I use factoring?

Truckers who use standard trucking factoring services need to know some important information. Find out what you should know about UCC Filings and Factoring and why they are important for carriers.

You’re going to get all kinds of fancy terms like UCC filings, but all it really is is a piece of paper the lender files saying “Hey, we lent money on this collateral.” A UCC filing is just a public record of any time a company takes on collateralized debt. If you were wondering, UCC stands for Uniform Commercial Code, which is a set of rules that all the states agree on. This keeps things consistent if you work across state borders.

There are other types of UCCs, but the one you’re likely to run into as a carrier is a UCC-1 lien. This is the filing the lender (like your factoring company) will file. They’ll list your name, and the property that you’re offering as collateral and say “We lent money on this stuff.”

Where it comes into play is if you have a dispute in a collection scenario — for example, your factoring company has a recourse invoice they’re still chasing you on. So if there was ever a payment that didn’t go through, the factoring company would have something to show for what they’re owed. Then any time someone does a UCC search for your company, they’re going to see how many liens there are against you. The more liens there are against you, the less likely another lender is going to lend you money.

Don’t freak out. It’s normal in factoring. But it’s definitely something you want to read carefully when you sign your contract.

Ask Your Lender to File a UCC-3 Form

So this is where you need to pay attention. Once you pay off the contract, ask your lender to file a UCC-3 form, which is the public record saying “Hey, this is paid off!” You need that one. They’ll go in and remove that lien from the public record. But a lot of lenders will just let it fall off after five years, and that’s a shame, because it’s still a black mark on your company, and might be the thing that keeps you from getting new financing to grow in the future. So follow up on this, and make sure that old lien doesn’t hold you back from future opportunity.

The easiest way to check for old liens is to go to the state department of the state you’re based in, and search under “UCC Filings” or your company’s name, and you’ll see any expired agreements that need to be removed.

So, be careful. Don’t have a lot of liens against your business - UCC Filings or otherwise. The longer that list is, the less likely you are to get the financing or partners you need to grow your company.

Kinds of UCCs

The most common kinds are the all-asset lien - the blanket lien - or the collateral-specific lien. If you’re borrowing for a truck, or just against invoices, ask for a collateral-specific lien. And if you have a lien on all your assets, you should be aware that not all your personal stuff is protected from business debt, so be careful.

When Do They File Their Lien

When you sign with a factoring company, most likely, they will file that lien showing they have an interest in the accounts they’ve purchased. But some factors file that lien while you’re still applying. And if you’re shopping, ask them - when do they file their lien? Ask every factor you talk to. Because if one factor files a lien while you’re still applying, and then you sign with a different factor, the lien from factor A needs to be ended, before you can sign with factor B. That can mean delays and surprises.