You signed the agreement Tuesday morning. The wire hit your account Tuesday afternoon. By Wednesday, a UCC-1 financing statement is on file at the Secretary of State naming your business as debtor and the funder as secured party. You did not authorize a separate filing. You did not see a UCC-1 in the closing documents. But there it is on the public record.
This is not a mistake. It is a deliberate playbook.
Why Funders File Immediately
The funder’s goal in filing same-day is to lock priority. Under UCC § 9-322, priority among competing security interests in the same collateral is determined by the first to file or perfect. If another funder approaches you tomorrow and runs a UCC search, they will see the prior filing and either decline to fund or fund only as a junior creditor, which significantly affects pricing and willingness.
From the original funder’s perspective, the lien is cheap insurance. It costs them maybe 50 dollars and ten minutes of paperwork. The benefit is enormous: they have functionally restricted your ability to take competing advances, which means more of your future cash flow stays available to repay them.
The Contract Authorization Question
Most MCA agreements contain a clause authorizing the funder to file UCC-1 financing statements describing the receivables purchased and, frequently, all other business assets. The question for any individual case is whether the filing matches what the contract authorized.
If your contract specifies a security interest in “receivables arising from sales to credit card processors,” and the actual UCC-1 describes “all assets, including equipment, inventory, intellectual property, and general intangibles, now owned or hereafter acquired,” the filing exceeds the authorization. Under UCC § 9-509, the secured party may only file a financing statement that the debtor has authorized.
Compare the collateral description on the UCC-1 against the security interest language in your MCA agreement. Mismatches are common, and overbroad filings are vulnerable. An independent attorney can challenge an unauthorized filing under UCC § 9-518 and § 9-625.
The Immediate Consequence: You Cannot Stack
Within hours of the UCC-1 being filed, you are effectively locked out of additional advances from any funder that runs proper diligence. The reputable players check UCC filings before underwriting. The less reputable players will fund anyway, but at higher factor rates because they are taking junior position.
This is the dynamic that pulls struggling businesses into the deepest holes. The merchant needs a second advance to make payroll. The legitimate funders pass because of the first lien. The aggressive funders agree to fund but at a much worse rate. The merchant signs, a second UCC-1 goes on file, and the cycle accelerates.
What to Do When You Discover the Filing
If you just discovered a same-day UCC filing on your business and you are considering future financing:
- Pull the actual UCC-1. Get the filing from your state’s Secretary of State. Read the collateral description.
- Compare it to your MCA agreement. Confirm what you authorized.
- Do not sign another advance to “refinance” the first. A second filing on top of a first does not solve anything; it doubles your exposure.
- Run the payoff math. What does the funder need to release the lien? Is settlement available at a discount?
- Map a negotiated release. The lien comes off when the obligation is satisfied. The path to satisfaction may be a settlement at 50 to 70 cents on the dollar rather than full payoff.
The Refinance Path That Actually Works
If your goal is to get new, cheaper capital, the only durable path is to clear the existing lien. A new lender will rarely fund over an active blanket UCC. The sequence is: negotiate settlement with the existing funder, obtain a signed UCC-3 termination in escrow, close the new financing, fund the settlement, file the termination.
Our senior advisors run that sequence frequently. The settlement negotiation, the UCC-3 escrow, and the coordination with the new lender are operational tasks we handle. The legal review of the security documents and the termination filing belong to an independent attorney from our referral network.
If the Filing Is Wrong
If the filing exceeds what you authorized, or names assets not covered by the security agreement, you have remedies under Article 9. An independent attorney can demand correction, file a UCC-518 information statement, and pursue damages and termination under § 9-625 if the secured party refuses to comply.
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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