Leading invoice factoring company Viva Capital says a lack of information may be to blame for unanswered questions small businesses have in relation to UCC filings. Full coverage of the topic can be found in “What is a UCC Filing, and Do I Need One?” which is now live on VivaCF.net.
UCC, short for Uniform Commercial Code, is a grouping of laws that govern commercial transactions in the United States. The UCC-1 filing, also referred to as a UCC lien, tends to be what catches most small business owners off guard, Viva representatives say. This legal form, which creditors or lenders file with the Secretary of State in a business’s home state, creates a public record that the filing entity has a security interest in the business or personal property of a borrower.
“The UCC-1 is often the very thing that allows a small business to obtain funding,” explains Director of Business Development and Partner of Viva Capital Armando Armendariz. “It gives lenders more confidence and increases the odds of approval.”
He says that business owners are sometimes wary of the filing, thinking that it’s going to impact their credit, but that this isn’t always the case. An entity will often file a specific collateral lien that relates to a named asset, such as inventory, real estate, or receivables. It means that no other lender can use the listed asset as collateral or that, if they do, the entity that filed first has first rights to it.
However, sometimes companies file a blanket lien, which relates to all of a business’s assets, or they don’t file for a lien removal once the debt is satisfied. In these cases, businesses may have trouble qualifying for credit.
“The good news is, most states have a very easy process to remove these liens,” Armendariz continues. “The business owner can contact the lienholder to request removal or swear an oath of full payment with the Secretary of State’s office.”
He says that UCC filings shouldn’t be a barrier to obtaining funds for this reason and that those concerned about potential UCC filings can check their state records or credit report to see if any are listed.
