A UCC lien is a very common result of a business taking out a merchant cash advance (MCA) or other secured loan. The lender files a UCC report to let other potential creditors know that the business has already leveraged some or all of its assets.
While it is not unusual, a UCC lien on your company’s credit history can be a problem. While it does not damage your credit score directly, it can still make it more difficult to obtain credit at reasonable terms. After pulling your business’s credit history and seeing the UCC lien on it, a lender could decide you do not have anything left of value to serve as collateral. Or it could convince them that your business has already taken on all the debt you can handle, even if you know the company would be able to keep up on the payments even with the new loan.
When the lien is still on your report
The lien should be taken off your credit report once you pay off the related debt. The creditor is supposed to file a statement with your local secretary of state’s office asking it to remove the lien. Unfortunately, this does not always happen as promptly as it should. Here are three tips for dealing with that.
- Keep a close eye on your business’s credit reports. The sooner you spot a UCC lien that should not be there anymore, the sooner you can take action to get it removed.
- Contact the lender that filed the lien and ask it to file the necessary statement. It might have been an honest mistake or miscommunication with the secretary of state’s office.
- If that does not work, contact the secretary of state directly. You might need to contact your own state’s secretary of state or another state, depending on where the lien was filed. The office could ask you to provide evidence you paid off the debt and swear under oath as well.
This can be a relatively simple UCC lien-related problem to fix. Other matters could require help from a lawyer who practices this particular area of business law.