Imagine taking out a merchant cash advance (MCA) to keep your business running. Now you see a Uniform Commercial Code (UCC) line on your records, and you have questions.
This can feel confusing and even alarming. But understanding what this means helps you protect your business and plan your next steps. Hence, knowing how you got here starts with understanding the basics of MCAs.
What is a merchant cash advance?
A merchant cash advance provides rapid funding to small businesses. You receive an upfront sum and then repay it, along with additional fees, from your future sales. Many business owners usually favor MCAs because they offer swift cash with fewer requirements than traditional loans.
However, there are some conditions to be aware of. Typically, the lender will file a UCC lien to safeguard their investment, so it’s crucial to understand what a UCC lien entails for you.
What you need to know about UCC liens
A Uniform Commercial Code (UCC) lien is a legal claim placed by a lender on your assets. When a merchant cash advance (MCA) lender files this lien with their respective Secretary of State, it indicates they have a right to specific assets if you fail to meet payment obligations.
This filing is often public, allowing other lenders to view it. This usually makes securing additional financing even more challenging. The impact of a UCC lien can vary based on which assets it covers, depending on the specific type of lien on your business.
Three types of UCC liens you should know
Different lien types may give lenders different levels of control over your assets. Hence, here are the three main types you may encounter:
- Specific Collateral Liens: This type of lien focuses on one specific asset. For instance, a lender might only have rights to a piece of equipment. If you default, they can only take that asset.
- Blanket Liens: This type of lien covers all your business assets. Most MCA lenders prefer this type because it gives them broader security. This includes inventory, equipment and future receivables.
- Non-Purchase Money Liens: This applies to assets you already owned before taking the advance. Your lender can claim existing equipment or inventory. This means they have rights to items you did not buy with MCA funds.
Thus understanding your lien type helps you see your options. If you want to address the lien on your business, there are steps you can take.
How to remove UCC liens on your property
If you’re having trouble with your MCA debt or suspect that a lien was wrongly filed, it might be helpful to reach out to a knowledgeable UCC lien attorney. They can examine your filing for any mistakes and dispute liens that were placed without proper authority.
An attorney can also negotiate with your lender on your behalf or pursue emergency relief if the lien affects your ability to run your business. With the right legal support, you can explore strategies to safeguard your business and progress.