Merchant cash advance companies may file UCC financing statements to give notice of a claim against your business’s assets. If the filing has errors, you may have grounds to challenge it. But a filing mistake does not automatically erase the debt or security interest. The legal effect depends on the type of error and the state’s UCC rules.
Filing errors that may affect a secured party’s claim
One of the biggest problems is a wrong debtor name. For a registered organization, the filing usually must use your business’s legal name as it appears in the public organizational record. A trade name alone may not be enough. A misspelling can also create trouble.
Other problems may include filing in the wrong state or using information that makes the filing hard to find in a standard search. These mistakes can affect perfection and priority.
Collateral descriptions and missing details
A financing statement must identify the collateral covered by the filing. Article 9 allows broad collateral descriptions, so a filing is not defective just because it lacks detail.
The main question is whether the filing meets the legal requirements. Some missing details do not matter. For example, a missing organizational identification number does not always invalidate the filing.
How errors affect lender claims
A filing defect can weaken the MCA company’s claim to perfection or priority against your other creditors. Under Article 9, a seriously misleading filing may be ineffective against certain creditors.
That does not always mean the debt or security agreement goes away. The dispute may instead involve whether the security interest was perfected, whether another creditor has priority or whether the filing should be corrected or terminated.
How to evaluate whether a UCC filing can be challenged
Finding meaningful filing errors takes more than spotting typos in a UCC-1. A review should focus on the debtor’s legal name, filing location, collateral description, the underlying agreement and the applicable Article 9 rules. An attorney experienced in commercial disputes can review the filing, assess perfection and priority issues and identify possible options to challenge it.
