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What are the types of UCC liens?

On Behalf of | May 22, 2024 | UCC Liens

UCC liens typically function as a statement placed on collateral, allowing lenders to secure loan contracts. They are usually part of a business contract, so they can take effect while keeping the borrower informed of what the arrangement entails and what could happen if they fail to repay the debt appropriately.

Additionally, different types of UCC liens can function similarly but have distinctions based on what assets they can cover according to the situation. It could be crucial to understand these lien types to know how they will work, such as the following:

  • Specific collateral — Sometimes, lenders can place the lien on particular assets, specifically real estate properties or equipment used in business operations. This option can allow creditors to repossess assets bought using the loaned amount.
  • Blanket lien — This type of UCC lien secures rights by covering an unspecified range of assets with accompanying terms indicated in the statement. Depending on the circumstances, some lenders may prefer this lien.

These liens have different features that could have advantages and pitfalls, which can vary as situations change. Both can also be vulnerable to legal issues, especially if either party violates the terms of the arrangement.

Addressing issues involving UCC liens

Having a UCC lien placed on your business assets can seem scary, considering how it can become in specific scenarios. The business can also have a lot to lose if the lender repossesses collateral for unpaid debt. In these situations, seeking legal guidance can be vital. Receiving experienced counsel can help fully understand the circumstances and determine appropriate options in case legal action becomes necessary to address issues.