If you’re a business owner burdened by a merchant cash advance (MCA), you should know that a possible mistake on a form could jeopardize the UCC lien on your assets. It might seem trivial, but if the MCA company did not get your company’s name exactly right, their lien on your equipment, vehicles or other assets might not be enforceable in court.
UCC-1 form: the devil is in the details
When you take out an MCA, the provider files a UCC-1 form with your state’s secretary of state’s office. This one-page form is how they perfect their lien on your business’s property and makes it easier for them to seize your assets if your business defaults on the advance. Sounds straightforward, right? Wrong. If one piece of information on this form is incorrect, it can invalidate the lien. This isn’t just a clerical error; it’s a fatal flaw.
Name precision: the linchpin
The key mistake lies in the debtor’s name. Your company’s name on the UCC-1 form must match exactly how it appears on your charter or foundational documents. Every capital letter, space, period, and comma must be mirrored precisely. This is not always as simple as it sounds. Besides making a simple typo, the MCA provider might confuse your business’s DBA or trade name instead of its legal name. By the way, if the advance recipient is an individual, it’s the same deal. The name on the UCC-1 must match exactly as it appears on their driver’s license. No exceptions.
The repercussions
An incorrect name can lead to the UCC lien being deemed invalid. This means the MCA provider loses their secured interest in your assets, and you could potentially challenge the lien. However, don’t let this give you a false sense of security. MCA providers are ruthless and will come after you with everything they’ve got. But understanding this vulnerability can give you a fighting chance.
The bottom line
One small mistake on a UCC-1 form can make or break the lien on your business. Don’t underestimate the importance of getting every detail right. If you’re dealing with an MCA, scrutinize the UCC-1 form like your business’s future depends on it — because it could. Protect yourself with legal representation and use every means at your disposal to fight for your business.