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Can I sell my business despite having a UCC lien?

On Behalf of | Apr 29, 2024 | UCC Liens

Owning and running a business could be a dream for many people, making them go to lengths to start it using various funding sources, no matter how risky. In some cases, the owner could put down the business as collateral for a loan, putting pressure on its capacity to earn enough money to pay off the debt.

If the business fails to perform well, the owner may face the difficult decision of determining what to do next, especially if a creditor places a UCC lien on the business. Selling the company to pay off the debt may seem viable, but it might not always be advantageous based on the situation.

What to consider before selling the business?

UCC liens can be challenging to work through if the debt is significant and tied with collateral that is vital for the business or owner. Usually, lenders place these liens on the business’ equipment, inventory, company vehicles, properties, income and even secured investments, depending on the lien’s details. Additionally, business owners typically cannot gain additional lines of credit unless they pay off the existing debt.

These conditions could make it beneficial to sell the business altogether, but this option may do more harm than good. It is possible to sell the company, but the UCC lien will remain. Because of its existence, the owner may need to disclose the lien to potential buyers and consider the lenders before proceeding with the sale. Also, the lien could be part of the business liabilities, which can impact the selling price significantly. In some instances, the amount earned from the sale might not be enough to cover the accumulated debt.

Know what to do about UCC liens

In most scenarios, it can be helpful to review other options before deciding to sell the business. Consider seeking experienced legal counsel when strategizing how to resolve the UCC lien and address the debt. Proper guidance can help owners keep the business running while addressing financial obligations appropriately.