UCC is an abbreviation for the ‘Uniform Commercial Code’ and was created to regulate business transactions uniformly. Its main objective is to standardize the process of business transactions across multiple states.
Generally, the article has been divided up into 11 articles. Each contains the language over different forms of commercial transactions.
UCC filing-this is the process where your lender files a legal document with the secretary of state if they happen to have a security interest against your assets or one of them. Technically, they allow a lender to have a formal claim to the collateral that the debtor pledged.
The UCC-1 protects the lender’s interest in the case that a borrower defaults or is bankrupt’ therefore, the named asset(s) are foreclosed and seized. They are then sold off in a bid to recover the lender’s money. UCC-1 is active for five years, after which the lender is mandated to renew the filings. This is only crucial if he has loan terms that extend longer than five years to keep the protected interests.
If a UCC filing is bad, it might prevent you from accessing higher-quality forms of business financing. If you have a UCC filing on your business credit report, it creates an impression to lenders that your business is not financially stable. Even if your debt obligation has been paid in full, UCCs can stay in your report for a very long time.
A UCC filed on your credit report can have devastating effects on your overall credit score and risk. It might ruin your opportunities at getting financial help for your business. Before you decide to apply for financial aid, you should ensure that your enterprise has no active UCC-1 files if you have already cleared your debt obligations. Furthermore, immediately request your lender to dismiss and terminate the lien on the asset. This is done by filing a UCC-3 form.
You must understand that the ability to grow your enterprise weighs heavily on how your business credit profile allures the lenders. If a UCC filing is bad, it negatively impacts your business credit report.
When you have been approved for a financial loan, the lender goes ahead to file the UCC-1 with the secretary of state and creates a lien against specific assets that the borrower uses as collateral for the funding; unless the creditor decides to name all assets and create a blanket lien. Before the document is approved, there needs to be three significant pieces of information.
- The name and address of the debtor
- The name and address of the lender
- An indication of the collateral. Whether it’s detailed or not, it should be able to identify what has been described rationally.
The notices of UCC lien filing are of public records and will regularly be published in the newspaper. A lot of creditors would prefer to file liens on real estate or business property. If you default on your loan, they will be forced to sell most of your business assets. A judgment creditor has the option to seize money from your account.
Technically, a UCC filing is not as detrimental if it permits you to have access to more affordable funding for your business. If you want to know if a UCC filing is bad, check your business credit report. Ensure that all your debt obligations have been paid off. Contact your lender as soon as possible and have them file UCC-3 to cancel active liens. This will prevent last minutes of delays or denials by different creditors because of active UCC-1 claims. Be diligent in your efforts as it would take as much as six weeks to finalize the termination of old UCC-1