UCC Filings: What They Mean for Your Business

When you sign most commercial financing agreements, a UCC-1 filing follows. This Uniform Commercial Code filing gives the lender a security interest in your business assets. Understanding what you're giving up—and how it affects your future options—is critical before signing.

What Is a UCC Filing?

A UCC-1 Financing Statement is a legal document filed with your state's Secretary of State office. It provides public notice that a creditor has a security interest in specific assets of your business.

Think of it as putting a lien on your business. Just as a mortgage gives a bank interest in your home, a UCC filing gives a funder interest in your business assets.

What Assets Are Covered?

This is where things get tricky. UCC filings can be narrow or broad:

Most MCA and alternative financing agreements use blanket filings. Even though they're technically buying future receivables, they secure the agreement with everything you own.

How UCC Filings Affect Future Financing

When you apply for new financing, lenders check your UCC filings. Multiple filings, especially blanket ones, create problems:

• Banks get nervous: Traditional lenders often won't lend when they see multiple UCC filings from alternative funders
• Position matters: The first funder to file has the senior position—they get paid first in any liquidation
• Refinancing becomes difficult: New lenders want first position, which requires paying off and releasing existing filings
• Asset sales get complicated: Selling equipment with a UCC lien attached requires creditor cooperation
• Business sale implications: If you try to sell your business, existing UCC filings must be addressed

The "All Assets" Problem

Blanket UCC filings create a particular problem when you have multiple funders. Each one claims a security interest in "all assets." In reality, priority is determined by filing date—but the messy layering makes cleanup difficult.

Example scenario:

1. Funder A files blanket UCC in January 2024
2. Funder B files blanket UCC in March 2024
3. Funder C files blanket UCC in June 2024
4. You want a bank line of credit in September 2024

The bank sees three blanket liens on everything you own. Even if you can pay off Funder C, the bank still sees A and B in front of them. Getting the bank to lend requires addressing all three positions.

UCC Filing vs. Lien

A UCC filing itself isn't a lien—it's notice of a potential security interest. The actual lien comes from your financing agreement. But practically speaking, the effect is the same: your assets are encumbered.

The distinction matters in disputes. A UCC filing doesn't automatically mean the funder has a valid security interest—the underlying agreement must support it. We've seen improperly filed UCCs that didn't actually match the agreement terms.

Getting UCCs Released

When you pay off a financing agreement, the funder should file a UCC-3 Termination Statement within a reasonable time. But this doesn't always happen automatically.

Best practices after payoff:

1. Get a payoff letter confirming the full amount paid
2. Request a UCC-3 termination in writing
3. Follow up to confirm the termination was filed
4. Check your state's UCC database to verify the release
5. Keep documentation—you may need it for future financing

Before You Sign: Questions to Ask

Any time someone wants you to agree to a UCC filing:

• What specific assets are covered? Push back on blanket filings when possible
• How does this interact with existing filings? Stacked UCCs create complexity
• What's the process for release upon payoff? Get this in writing
• Will there be a personal guarantee on assets? This extends the lien to personal property
• Can we negotiate narrower terms? Sometimes you can—especially if you're a strong borrower

Our Contract Review Approach

When we review financing agreements for clients, UCC provisions are a key focus area. We look for:

• Scope of assets covered and whether it's appropriate for the financing type
• Interaction with existing filings and priority implications
• Release provisions and timelines
• Personal guarantee provisions that extend to personal assets
• Opportunities to negotiate narrower terms