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What is the UCC?

On Behalf of | Jan 22, 2024 | Merchant Cash Advances

New York’s merchant cash advance (MCA) industry operates largely outside of the laws and regulations that govern traditional banks. The rules that apply to a mainstream small business loan often do not apply to MCAs because they are technically commercial transactions, not loans. Business owners thinking about taking out an MCA should be aware that they will probably have fewer rights regarding debt collection than if they had gone to a normal lender instead.


However, one set of laws does apply to MCAs: the Uniform Commercial Code, commonly called the UCC. The UCC is a set of privately developed laws intended to make each state’s sales and transactions laws the same. Each state, including New York State, has enacted at least some of the UCC’s recommended rules of commerce. Among other things, the UCC regulates how businesses borrow money. The contract that you sign with the MCA lender must conform to UCC rules or be invalid.

Because MCAs are relatively new, even experienced business owners might not realize the difference between them and small business loans — and the implications if there are problems or misunderstandings later on. For example, instead of monthly payments, an MCA recipient might be expected to pay weekly or even daily out of their credit card proceeds. A slow day, week or month could put you at serious risk of losing the assets you put up as collateral.

Knowing your rights

Fortunately, you might have other options for dealing with your MCA and the UCC lien attached to your valuable assets. An attorney who represents business owners involved in an MCA dispute can clarify your rights and obligations and offer advice on how to proceed.