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Unlocking assets: A step-by-step guide to removing MCA UCC liens

On Behalf of | Mar 19, 2024 | UCC Liens

Business owners can use a Merchant Cash Advance (MCA) to quickly get funds to help cover the cost of business operations. When the business owner gets an MCA, the lender may file a UCC-1 financing statement. This public record indicates that the lender has an interest in the borrower’s assets.

What does the UCC lien cover?

It depends on the language of the agreement. It may cover a specific asset or serve as a blanket, applying to all business assets.

How do I remove a UCC lien?

Business owners looking to remove this encumbrance will need to take the following steps:

  1. Pay off the underlying debt. The first step is to satisfy the debt associated with the lien. If unable to pay off the MCA debt, assess the balance and attempt to negotiate with the lender.
  2. File appropriate paperwork. Once the business has settled the debt, the lender should file a UCC-3 financing statement amendment to terminate the lien.
  3. Get copies of the paperwork. After full repayment, directly contact the lender to request the filing of the UCC-3 form. This document serves as an official termination statement.

If the lender does not move forward with filing, a business owner has the right to file the UCC-3 form themselves as long as there is no remaining obligation to the lender.

Is there anything else I should know?

Even after filing the UCC-3 form, it is wise to monitor the public record to confirm the lien’s removal. If the lien remains, contact the lender or seek legal counsel for additional aid.

In theory, clearing a UCC lien is a straightforward process once the business repays the MCA. By removing the lien, the owner removes the encumbrance created by the UCC lien, which is crucial for maintaining financial flexibility and credibility.

In reality, the process does not always go as smoothly as it should. The MCA may have excessive, unmanageable interest rates or aggressive collection efforts that make it difficult to repay the loan or the lender may not take the necessary steps to remove the UCC lien once the debt is repaid. In either situation, know that you are not alone. Businesses throughout the country have found themselves fighting MCA companies to remove UCC liens and live up to their end of the bargain.

At times, these fights require more than just an attempt at negotiations. When additional assistance is needed, it is best to find legal counsel experienced in this niche area of law.