It is a common practice for business owners to have UCC liens on their properties or assets after taking out MCAs. It can be essential when establishing the agreement to protect the lender from losses if the debtor fails to repay the advance.
However, the debtor may face unexpected circumstances, making them unable to pay off the advance in time fully. In these scenarios, the debtor can seek an extension on the lien before its expiration date by filing a continuation statement.
How it works and when to file it
Around six months before the UCC lien expires, the debtor may already have a good idea of whether they can fully repay before the expiration date. During this time, they can decide to file a continuation statement on the lien to extend the term up to around five years, depending on the circumstances. This statement amends the lien, implementing changes to protect both the lender and the debtor.
It is crucial for debtors to file the continuation statement on time. If filed too early or too late, the statement can be invalid, subjecting it to refusal. After taking out MCAs, debtors should track their payments and balances closely, allowing them to file a continuation statement appropriately if needed.
Knowing what to do about issues involving UCC liens
Any debtor can find themself in a tough spot if they miss any vital details concerning a UCC lien, leading to issues that can severely impact their business and livelihood. By tracking repayments adequately, they can determine whether they need more time or flexibility to pay off the advance properly.
If they foresee more complex problems, seeking legal counsel can be helpful. Doing so can help debtors learn about appropriate options to address these issues and other potential risks.