Lincoln and Morgan - What Is a UCC Filing and How Does it Affect My Credit Score?

Lincoln and Morgan - What Is a UCC Filing and How Does it Affect My Credit Score?

Every business owner wants to maintain the creditworthiness of their company, which means having a good handle on finances. Learning about regulations like the Uniform Commercial Code (UCC) can help you understand more about how to protect your company’s assets.

First published in 1952, the UCC is a long list of guidelines for states to use in governing business transactions. One of the UCC rules allows business lenders to use a legal procedure known as a UCC filing to stake claims on the assets you put up as collateral for loans.

Here are some important things to understand about UCC filings, their potential impact on your business and funding options that help you steer clear of them.

What Is a UCC Filing?

The more precise legal term for the submission of this form is a UCC-1 filing, so named because it’s described in Article 1 of the Uniform Commercial Code. It’s most commonly referred to as either a UCC filing or UCC lien. The form itself is called a UCC financing statement or UCC-1 financing statement.

Lincoln and Morgan - What Is a UCC Filing and How Does it Affect My Credit Score?

What Assets Are Subject to a UCC Lien?

There are two general types of UCC liens: liens against specific assets and blanket liens, which make nearly all your business assets subject to repossession.

Specific liens are commonly involved in the financing of business equipment. If you’re borrowing money to purchase restaurant equipment, construction equipment or vehicles, for example, the lender may claim the right to repossess those items if you default on the loan.

How Does a UCC Filing Affect My Credit Score?

Any UCC liens filed against your assets within the last five years will show up on your business credit report, which may affect your ability to borrow from other lenders. For example, the lender who files the claim will get first dibs on your assets.

Is a UCC Agreement a Good Idea?

A business loan that requires you to put up collateral — and thus agree to the lender’s right to claim those assets if you default — may make sense if it provides access to funding at affordable rates that you couldn’t otherwise obtain. If you feel confident that your company’s revenue and cash flow outlook are solid enough to repay the loan, you may decide that your risk of losing your assets to a lien is minimal.

Lincoln and Morgan - What Is a UCC Filing and How Does it Affect My Credit Score?

About the Agency: Lincoln and Morgan is a Highly Rated Mediation And Forwarding Firm which provides services like Commercial UCC Lien Mediation, Commercial Mediations & manymore.