UCC filings impact small businesses’ access to credit, industry insiders say


Leading invoice factoring firm Viva Capital says a lack of information may be behind small businesses’ unanswered questions about UCC filings. Full coverage of the topic can be found in “What is a UCC repository and do I need one?” who is now live VivaCF.net.

UCC, short for Uniform Commercial Code, is a set of laws that govern business transactions in the United States. The UCC-1 filing, also known as the UCC lien, tends to be what surprises most small business owners, according to Viva representatives. This legal form, which creditors or lenders file with the Secretary of State in a business’ home state, creates a public record that the filing entity holds a security interest in the business or personal assets. of a borrower.

“The UCC-1 is often what enables a small business to obtain financing,” explains Armando Armendariz, director of business development and partner at Viva Capital. “It gives lenders more confidence and increases the chance of approval.”

He says business owners are sometimes wary of depositing, thinking it will impact their credit, but that’s not always the case. An entity will often file a specific security lien that relates to a named asset, such as inventory, real estate, or receivables. This means that no other lender can use the listed asset as collateral or, if they do, the entity that deposited it first has the first rights to it.

However, companies sometimes file a general lien, which relates to all of a company’s assets, or do not request the removal of the lien once the debt is satisfied. In these cases, businesses may find it difficult to qualify for credit.

“The good news is that most states have a very simple process for removing these privileges,” Armendariz continues. “The business owner may contact the lien holder to request withdrawal or swear an oath of full payment to the office of the Secretary of State.”

He says UCC deposits should not be a barrier to obtaining funds for this reason and those concerned about potential UCC deposits can check their state records or credit report to see if any are listed.


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