Equipment is different. A blanket UCC lien over receivables and intangibles is disruptive, but it does not generally produce a repossession scene. An equipment lien can. When a secured creditor moves to enforce on tangible business property, vehicles, machinery, kitchen equipment, computers, furniture, the merchant can find equipment being hauled out the door, sometimes with little warning.
Understanding how Article 9 governs equipment enforcement, and what rights you have at each stage, is the difference between losing operations overnight and managing a structured wind-down.
How Equipment Becomes Secured Collateral
An MCA agreement may grant the funder a security interest in equipment in one of two ways. The first is an explicit equipment-specific grant: the contract names categories of equipment as collateral. The second is a blanket grant covering “all assets, including equipment.” Both can support a UCC-1 filing covering equipment.
The security agreement also determines what triggers enforcement: typically a payment default, breach of a financial covenant, or, in some agreements, the funder’s discretionary determination of insecurity.
Repossession Without Breach of the Peace
Under UCC § 9-609, a secured party with a perfected security interest in collateral may take possession without judicial process, provided it can be done without breach of the peace. Breach of the peace is a fact-specific concept; courts look at whether the repossession involved physical force, threats, entry into closed premises, or confrontation with the debtor.
If the funder breaches the peace, the merchant has remedies under § 9-625, including damages and potentially conversion claims. In practice, MCA funders rarely conduct equipment repossession because the collateral is not typically liquid enough to justify the operational cost. More common is the threat of repossession as leverage in settlement negotiations.
If equipment is being repossessed, do not physically resist. Confrontation converts the funder’s lawful repossession into a breach of the peace that can support damages, but only if you remain non-violent and document the events. Resistance creates personal legal exposure and does not protect the equipment.
| Criterion | Right of Redemption | Strict Foreclosure |
|---|---|---|
| Authority | UCC § 9-623 | UCC § 9-620 |
| Who initiates | Merchant | Funder (with consent) |
| Cost | Full debt + costs | Equipment value only |
| Keep equipment? | Yes | No |
| Best when | Equipment is essential to operations | Debt far exceeds equipment value |
Your Right of Redemption
Under UCC § 9-623, until the secured party has disposed of the collateral or entered into a contract for disposition, the debtor has a right to redeem the collateral by paying the full obligation secured by the equipment, plus reasonable expenses incurred in the repossession.
This is a significant lever. Even after the equipment has been taken, you have a window to pay and recover it. The window closes when the secured party sells or contracts to sell. In commercial transactions, the right of redemption can be waived in the security agreement after default, but pre-default waivers are not enforceable.
Notice and Commercial Reasonableness
Before the funder sells the equipment, UCC § 9-611 requires reasonable notification to the debtor of the time, place, and method of disposition. In commercial transactions, 10 days’ notice is generally deemed reasonable. The notice must contain specific information about the disposition.
Defective notice creates liability for the funder under § 9-625, including a presumption that the funder’s claim is reduced by the difference between the actual sale price and the price that would have been obtained with proper notice.
Any disposition must also be conducted in a commercially reasonable manner under UCC § 9-610. The funder cannot sell the equipment to itself or a related entity at below-market prices, and must conduct the sale in a way that would reasonably maximize the price. If the disposition is not commercially reasonable, the merchant can challenge the deficiency claim.
What to Do Before Repossession Begins
If you receive any communication suggesting equipment repossession is being considered:
- Pull the security agreement and confirm what equipment is actually covered.
- Run a UCC-11 search to confirm the funder’s filing is properly perfected.
- Document the current condition and fair market value of the equipment.
- Open a settlement track with the funder before repossession is initiated.
- Consult independent counsel about the redemption right and notice requirements.
The Settlement Lever
In most equipment-lien cases, the funder’s leverage is the threat of enforcement, not the proceeds of disposition. Equipment sells for a fraction of its operational value in liquidation. A funder taking a 50,000-dollar piece of equipment may recover 8,000 to 15,000 dollars at auction, after costs.
That math creates settlement room. A merchant who pays 25 to 35 cents on the dollar in a negotiated resolution often delivers more value to the funder than enforcement would, while keeping the equipment in operation. When repossession is imminent, independent counsel from our referral network evaluates perfection, notice validity, and commercial reasonableness.
Delancey Street is a business debt-relief company, not a law firm. When a matter requires legal work, we refer you to an independent attorney from our referral network; the attorney–client relationship is between you and that attorney.
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