Struggling with business debt?

Uh Oh! There’s a UCC Lien on My Small Business – What Should I Do Now?

As a small business owner, finding out that there is a UCC (Uniform Commercial Code) lien filed against your business can be scary and confusing. I feel you – it happened to me too a few years ago. But don’t panic! With some knowledge about what these liens are, why they get filed, and what your options are, you can get through this.

First Things First – What is a UCC Lien Anyway?

A UCC lien (also called a UCC financing statement) allows a creditor to put other creditors on notice that they have a security interest in a debtor’s personal property. Basically, it’s a way for creditors to stake their claim on certain assets of the business as collateral for a loan or credit line.

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These liens are usually filed by banks or other lenders when they loan money to a business. The lien gives them a secured interest in the equipment, inventory, accounts receivable or other assets of the business. So if the loan goes into default, the bank has a right to seize and sell those assets to get repaid .

Don’t Freak Out – You Have Options

I know that lien sitting there feels scary. Believe me, I lost some sleep over mine! But don’t spiral into panic. There are things you can do to resolve this.

First, get clear on why the lien is there. Call the creditor and ask them to explain. There are a few possible scenarios –

• You took out a loan or line of credit with this lender, and the lien allows them to seize your assets if you default.
• You work with this supplier, and they filed it to make sure they get paid for materials they provide you.
• There is some kind of mistake, and the lien was filed incorrectly or in error.

Once you understand why it’s there and what agreement it’s connected to, you can work on getting it removed or released. This involves negotiating with the creditor, refinancing the loan with another institution, or paying off the outstanding balance. I’ll explain more on that process next.

How to Get a UCC Lien Removed from Your Business

Getting the lien removed takes some legwork, but it’s very possible. Here is what I did step-by-step to remove mine:

1. Open Communication with Creditor – Have an honest talk with the creditor about what options exist to release the lien. Perhaps you can restructure the repayment terms, agree on a lump sum payment, or refinance the loan elsewhere. See if you can strike a deal.
2. Pay Off Loan Balance – If possible, pay back what you owe the creditor in full. This could mean liquidating some assets, taking out another loan, or finding investors. Once paid off, ask them to file a UCC termination statement to remove the lien.
3. Add Collateral – If the creditor wants more security, see if you can pledge additional business assets as collateral. This gives them more coverage if you default and makes them more likely to release the original lien.
4. File Dispute – If there are inaccuracies or errors in the lien, you can file an official dispute. Show proof to the creditor and filing office, and request removal. You may need an attorney’s help here.

The key is being proactive and persistent with the creditor to demonstrate why the lien is no longer necessary. It took me several months of back and forth, but I succeeded. With some concerted effort, you can too!

Avoiding UCC Liens in the Future

Getting that lien removed will be a big relief! But you probably want to avoid going through this again in the future. Here are some smart ways to prevent new liens from being filed:

• Carefully review loan agreements and collateral details before signing.
• Pay loans and credit lines on time to stay in good standing.
• Talk early with creditors if you anticipate missing payments.
• Manage cash flow closely each month.
• Keep creditors updated on major business changes.

Basically, over-communicate with lenders and keep your commitments. This makes them much less likely to resort to filing liens. Staying on top of your finances helps too.

Don’t Lose Hope – You Got This!

I know the pain and stress of finding a UCC lien on your business. It shook me up at first too. But now that lien is long gone and just a distant memory! Be patient, be persistent with creditors, and don’t be afraid to ask for help. You can navigate through this challenge. It may take some work, but before you know it that lien will be released and you’ll be back to smooth sailing again. You’ve so got this!

– [Your Name], Small Business Owner

References:

1. UCC Filings – What Small Businesses Need to Know. SBA.gov.