One of the traps of a merchant cash advance (MCA) is the Uniform Commercial Code (UCC) lien, which can put your business at risk if you are not careful. A UCC lien is a type of security interest that lenders can file against a borrower’s assets, such as equipment and inventory. What can you do if you have agreed to broad collateral terms when signing an MCA agreement?
Understanding the scope of collateral terms
It is essential to review your MCA agreement carefully to identify any errors. For example, a lender might require you to pledge all your business assets, including future assets, as collateral. This means that if you default on the MCA, the lender can seize not just the original collateral but also any new assets acquired after the agreement was signed.
Negotiating the agreement
One way to address broad collateral terms is by negotiating with the lender. You may try to reduce the scope of the UCC lien. While this can be a difficult task after the signing of the agreement and filing of the UCC lien, it may be possible to reach a resolution by opening a direct dialogue with the lender.
Disputing the UCC lien through mediation
In addition, you can work with a mediator to dispute the UCC lien with the lender, but this requires the lender’s willingness to participate. Mediation can provide a faster and less expensive alternative to litigation.
Filing a lawsuit
If you believe that the lender has engaged in unfair or deceptive practices, you may be able to file a lawsuit to challenge the UCC lien. By filing a lawsuit, you can take a proactive approach to protecting your business.
Asserting your rights while seeking a resolution
As you face the complexities of a UCC lien on your business, it is vital to know your options and the potential consequences of each. By seeking advice from a legal advocate, you may understand the risks and assert your rights while seeking a resolution to your UCC lien issue.