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How can a UCC lien negatively affect your business?

On Behalf of | Apr 29, 2024 | Firm News

A UCC lien, or Uniform Commercial Code lien, is a notice filed by a creditor. It is a public declaration that they have an interest in one or more of your assets as collateral for a debt. Think of it like a bookmark in a book: It is a way for your creditor to mark their stake in your business and say, “I have a claim here.”

A UCC lien can impact your business in several ways. If you default on your obligations, the creditor could seize the assets listed under the lien. It also might become harder to get additional funding from other creditors since new lenders might not want to compete with existing claims on your assets. Furthermore, if you decide to sell your business to pay your debts, a lien can slow down the process, potentially turning buyers away.

Dealing with a lien against your business

Remember, UCC liens are a normal part of doing business, and with the right approach, you can handle them confidently. Here are steps you can take to manage or remove a UCC lien:

  • Verify the lien and the debt: First things first, make sure the lien is legitimate. Errors can happen, so check the details. Is the lien correctly attached to your business? Is the amount accurate?
  • Pay off the debt: The simplest way to remove a UCC lien is by paying the debt. If you cannot pay in full, consider negotiating a payment plan. Once you pay the lien, obtain a UCC-3 form and ensure the creditor files it. This officially removes the lien.
  • Challenge inaccuracies: If something is not right, you can challenge the lien. Gather your evidence and get ready to present your case.

While you might feel you can handle this alone, consider reaching out to a professional who has a thorough understanding of UCC liens. They can provide valuable advice and might even find solutions you had not considered.