What Is a Ucc Financing Statement Used for

The content provided here is for informational purposes only. For financial advice, please contact our trade finance experts. A UCC-1 financing statement – sometimes referred to as a “UCC-1 deposit”, “UCC lien” or simply “UCC-1” – is a form used by creditors to establish a lien on a debtor`s assets. As with any ordinary lien, lenders must refine the UCC-1 declaration by filing it with the appropriate agency in the state where the debtor company is registered. In most cases, UCC-1 returns are filed with the Secretary of State, who then timestamps the document and assigns a file number to related parties. A UCC Uniform Commercial Code-1 statement is a legal notice filed by creditors to publicly declare their rights to potentially obtain the personal property of debtors who default on the commercial loans they grant. These communications, often abbreviated as “UCC-1”, are usually printed in local newspapers to raise awareness of the creditors` intentions. These communications, which are required for all business loans under the Unified Commercial Code (CDU), set a relative priority for which specific assets can be seized and in what order, while consolidating the collection order in cases where there are multiple lenders for the same debtor. The filing of the UCC`s financial statements creates a hierarchy of assets that can be seized and in what order if the debtor defaults or files for bankruptcy.

For example, if a borrower takes out another loan from a second lender that uses the same assets as collateral, the second lender may not recover the assets until the first lender is fully satisfied. As a result, UCC-1 applications are usually filed as soon as the loan is granted. A UCC-1 is a financial statement that a creditor submits to inform other parties that they have a security right in one or all of your assets. UCC-1s sometimes cause confusion among business owners who need equipment financing, and these quotes can affect your business credit score. However, UCC-1s are usually not something to be afraid of. These statements have been increasingly used fraudulently[4] by supporters of the redemption movement, who believe that the statements can be used to claim fictitious government funds. If a lender wants collateral (default protection) for a loan they grant you, they must complete a UCC-1 financing statement and attach it to the loan agreement you both sign at the end. This article explains what UCC-1s are, why lenders use them, and how they affect your business. Lenders have the option to file the following two types of UCC-1 statements: When a lender submits a UCC-1 to the relevant government agency – usually the Secretary of State of its state – it does what lawyers call “perfecting” their security in the collateral.

UCC-1s allows lenders to tell other lenders that there is a lien on an asset. Prior to the entry into force of the UCC, there was no universal system of registration of an asset used as collateral for a credit transaction. A company could provide the same device or assets as collateral for multiple loans. If the company defaulted on the loan, it would lead to a situation where multiple lenders would all be entitled to the same assets. When a company purchases a new or used device, it may choose to finance that item from someone other than the financial partner who has the UCC deposit for all assets. The new finance company will perfect its privilege with a UCC-1 and outpace the old fully active UCC by using a purchase price security only for that particular device. At Team Financial Group, we work with our clients to identify and tailor financing solutions that meet their individual needs. Our commercial equipment financing options can improve cash flow and the overall financial health of your business. To get fast and flexible financing today, fill out our simple online application and let us do the rest. However, you can renew a UCC-1 application before the end of the five-year period. You have the option to submit a declaration of continuation.

You must submit this Declaration of Continuation within six months prior to the expiry date or expiration of the first submission. If you are approved for a small business loan, a lender may file a UCC financing statement or a UCC-1 deposit. It is only a legal form that allows the lender to advertise privileges on a secured loan. This allows the lender to seize, pledge, or even sell the underlying collateral if you don`t repay your loan. .