Have you fallen behind on a business loan and you’re wondering how UCC filing works? Well, in this guide, we’ll explain the ins and outs of filing, how it could affect your business credit, and more. Just keep reading.
What Is a UCC Filing?
UCC filing is a phrase for Uniform Commercial Code. Different states have the right to establish certain laws to govern specific areas of uniform federal law. However, the UCC is referred to as a Uniform Act that writes laws that create similar regulations for each individual state.
The first of these surfaced in 1952 and numerous others were legalized to coordinate the law of sales and commercial transactions throughout the United States. Basically, the UCC is a laundry list of rules and regulations.
Types of UCC’s
There are a few different types of UCCs that can be filed on a corporation, depending on the number of creditors the debtor has. The two forms of UCC liens are as follows.
Specific collateral – this is a lien placed on one or more of the specific properties. It’s normal for machinery and inventory loans to have collateral that’s the same thing the company owner used the money for. When you want to buy a new forklift, for instance, the forklift is the collateral.
Blanket – Under this lien, the trustee demands the most, if not all, of the company’s net assets. Standard bank loans, SBA loans, and temporary loans all have blanket liens.
Real estate, office supplies, automobiles, inventory, and accounts receivable and payable are also examples of properties covered by a blanket lien.
UCC Filing and Credit Scores
Any UCC liens held on your estate over the last five years will appear on your company history sheet. It’ll potentially affect your ability to borrow money from other creditors. The lender who files the lawsuit, for instance, will get the first portion of your money.
If a potential lender finds a UCC-1 filing on your credit file, they can refuse to lend to you since you are a risk. If the company goes bankrupt, the lender is only entitled to recover their damages if the lawsuits of the first lender settle.
Removing a UCC Lien
Your lender can free your company from all demands on its properties after you’ve settled off a business loan. They can do so by submitting a UCC termination letter to the state’s secretary of state’s office.
However, since this move can take a while, it’s likely that expired UCC filings could show up in your company credit history. When you’ve paid your last debt payment, contact the trustee to request that the lien be canceled in writing.
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Understanding UCC Filing
Hopefully, this information helps you understand more about UCC filing. The important thing to remember is that even if you are affected by it, there is a way to remove a lien from your credit. But of course, your initial goal should always be to pay all of your creditors on time to avoid any hassles.
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