Receive a UCC Lien? Here’s What to Expect
A UCC-1 Filing Statement, also known as a UCC-1 Financing Statement, is a legal claim made against your company’s assets by a lender under the Uniform Commercial Code. It creates a UCC lien that gives the creditor the right to seize and sell certain assets to repay the debt if you default. It also gives them priority over later creditors in collecting its money.
Although this sounds ominous, UCC liens are common in the realm of business loans and are nothing to be concerned about unless a default occurs. There are two common types of UCC lien:
- A lien against specific collateral that is limited to some of the business assets. These liens are most common for loans intended for equipment financing and inventory financing. Typical collateral includes trade machinery, vehicles, and office equipment.
- A blanket lien that represents a security interest in all of the business assets. Blanket liens are common for traditional bank and SBA loans as well as alternative business loans.
How UCC Liens Affect Your Business
UCC liens ensure that a business owner can’t take out multiple loans using the same assets or property as collateral. While they won’t necessarily affect your daily business operations, they appear on the company credit report and can cause a problem if the creditor doesn’t remove the lien in a timely manner after you have paid the debt. This can prevent you from qualifying for more loans when you need them.
How to Remove a UCC Lien
Although a lender is supposed to remove a lien once the debt has been satisfied, they don’t always do so in a timely manner. You can check the status of the lien on your property by going to the Secretary of State website and running a search or using a commercial UCC search engine.
If the lien is gone, you can proceed to apply for any more financing you may need. If not, and the debt has been paid, ask the creditor to file a UCC3 financing statement amendment form that references the initial filing number and marks the termination box.
Another way to remove the filing and lien is to go to the Secretary of State office for your state and swear an oath of full payment. Once a termination notice is in place, the UCC filing record will remain on the company credit report for five years but indicate that the lien was satisfied.
Contact a Michigan UCC Lien Attorney
If you run into financial difficulties and a lender takes steps for foreclose on your company’s ICC lien, a Michigan business advisory attorney can help you take a proactive approach to the problem and devise a practical solution. We can also assist if the lender does not remove the lien in a timely manner after the debt is paid, impacting access to the financing you need to grow. To speak with a business law attorney and get legal advice you can trust, call us directly at 1-248-246-1166.See all videos