Did you know that 82% of small businesses fail due to a lack of proper funding? If you’re a small business owner you might wonder how you can get enough funding so you don’t fall victim to this common statistic.
One way to borrow funds is to put up personal or business assets as collateral. When you do this the lender will serve you with UCC filings and a financing statement.
Don’t worry, this is common business practice and if you don’t know what a UCC is or how to handle it properly then you’re in the right place. Keep reading to learn everything you need to know about UCC filings.
What are UCC Filings?
UCC stands for Uniform Commercial Code and is a set of rules and regulations governing business lending across the US. This set of rules is intended to provide uniformity for everyone, however, there are still distinctions for certain states.
Types of UCC
There are two distinct types of UCC filings. Your lender can decide which type they would like to file and will inform the business in the UCC financing statement.
Blanket UCC Filing
When filing a UCC, the lender can choose to put a lien against all a business’ assets. In this case, they would file a blanket UCC filing. This would ensure that the lender could seize or sell everything a business owns should the business owner fail to pay their debt.
Specific Collateral Lien
In contrast, if a business or business owner has a specific asset they would like to use for their collateral they can do so with a specific asset lien. In this case, the business owner could put up their personal home as collateral and continue to live there as they repay their loan.
UCC1 vs UCC3
In addition to the types of UCC filings, they can file two different forms against your business. The original document is called a UCC1 and is good for up to five years.
How to Remove a UCC Filing
In theory, once you’ve paid off a loan, the debtor should remove your UCC filing. However, that doesn’t always mean it’s the case. If you’re concerned you might have old UCC filings that could prevent you from borrowing in the future, be sure to run a check against your business credit report.
One important thing to remember is that in some states they will only run a check on the specific name you provide. However, if the UCC filing listed a variation of your business name such as “Thornbecker and Associates, LLC” rather than “Thornbecker and Assoc.” you might have trouble finding past liens.
If your business is in Deleware, you can find more information here regarding how Delaware is one such state. It’s important to run a check regularly to avoid an unnecessary headache down the road if you need to apply for another loan.
Minimize Your Risk by Knowing About Your UCC
As you can see filing a UCC is standard business practice and can give business owners the capital they need to grow their businesses. They also give lenders the peace of mind they need when they invest in new or growing companies.
Now that you know more about UCC filings, you can minimize your risk and understand your legal obligations. For more great information on this and other topics, check out the rest of our blog.