What is the Purpose of UCC Financing Statements?

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Uniform Commercial Code is a form of filing in regards to liens. These are connected to financial lenders who have an interest in an asset. This means that if someone were to enter an agreement where collateral is needed, the UCC lien may be filed against the assets that the borrower pledges in order to secure any loan monies.

While these liens have no direct negative impact on daily business transactions, they could stop more sources of funding being provided until the lien has been repaid in full. A UCC financing statement is a legal form used by a creditor or lender to file so that notice is given that there may be an interest in property owned by someone.

The UCC financing statement is usually a document or group of files that explain the interest the lending institution has in the debt or lien obtained for the borrowed funds. There are terms and information provided in these forms that explain the agreement of the debt and how it was created. There are two common UCC liens, and it is important to check if these exist with a property before going any further with a transaction. They may cause issues with a business, even if they do not directly lead to negative consequences. However, it is best to satisfy these types of liens before seeking additional assistance. It is important to contact a business lawyer to understand how to proceed and what may be necessary to conclude a UCC lien.

UCC and Credit

As with usual creditors being owed, there are often negative consequences to the credit score of an individual or business for liens or loans out that have not been removed or resolved. However, due to the influx of new organizations both online and through lending institutions, some options have opened that permit those with over $100 thousand in income and a good credit score. Unfortunately, this is not usually possible through a bank or other financial institution due to the outstanding lien. The interest that a lender has in one or more of the individual or company’s assets is what causes potential issues. Many other creditors look at the entire picture when determining if additional funds may be provided.

UCC liens are often part of normal business financing practices. The statements provided by these organizations are to explain that money is owed to a lender still and how much in interest and principle need to be satisfied by the entirety and for the month. The assets are pledged as collateral until the debt has been repaid. These statements in partial form are available to other lenders that the business or owner is seeking to obtain additional funding from when money is needed to run the company. If the UCC lien is in good standing, it is possible that the company may be looked upon favorably. However, outstanding balances and missed payments cause negative impacts on the business.

Origination of a UCC Filing

UCC filing usually originates from the initial pledge of an asset to a lending institution for a monetary loan that is signed with a security agreement in effect. This then provides to the creditor the right of using the granted asset as a form of collateral for the loaned monies. Then, the lending party usually files a UCC lien on the assets that have been pledged by the individual or business owner so that notice is provided to other potential lenders that may be see the lien through standard business practices. The UCC lien may be filed with specific persons individually or through a business. These liens work through a first come first serve basis which then gives the ability for the first lender to file the lien and have the rights to any assets connected to the loaned monies. This reserves a collection against the asset that was originally pledged.

Types of Assets and a Business Lawyer

There are usually only certain assets that may be pledged for a UCC lien. These may include various different pieces of office equipment, receivables in the company, business inventory, securities, larger equipment used in standard operations, numerous vehicles, real estate property, goods, promissory notes and credit letters. Despite what asset has been pledged, it is essential to ensure a business lawyer looks over any documentation and UCC financing statements to ensure all practices and procedures are valid, within the rights of the lender and accurate. Then, it is a matter of paying off the lien to ensure the asset is safe from seizure.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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