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This is one way a UCC lien can affect your business

On Behalf of | Jan 8, 2024 | UCC Liens

Most types of New York businesses, including manufacturers, restaurants and convenience stores, rely on their equipment. Machinery like ovens, freezers and machine tools let you and your employees provide customers with the goods and services you promise them. Over time, your needs can change and require you to buy and sell that equipment. This is a normal part of business.

But one thing could seriously hamper your ability as a business owner to sell your physical equipment: a UCC lien on that property.

MCAs and UCC liens

Merchant cash advance (MCA) companies often place a lien on a debtor business’s equipment as security against the advance. This means the MCA company has the right to seize that equipment if the debtor cannot make the agreed-upon payments out of the proceeds from their credit and debit card sales. It could also have implications for your ability to sell that equipment to a third party.

That’s because the UCC lien stays on the items no matter who currently possesses them. The MCA company could still seize it if the debtor business defaults. Companies looking to buy used equipment can perform a UCC search on it to find out if the title is clear or if there is a lien attached. Thus, it could be very difficult for you to sell your business’s things while the lien is still in effect.

When can I sell my equipment again?

The MCA company is supposed to remove a UCC lien once you have repaid the advance. There may be ways for you to clear title on your company’s equipment so you can do what you want with it again. But you will not be able to take action until you know your legal options.