What are UCC blanket liens?

UCC blanket liens
Definition of UCC Blanket Liens:

December 9, 2017.  UCC blanket liens are not uncommon, especially with traditional financial institutions.   However, what are UCC Blanket liens, what do they cover and what restrictions do they cause businesses?

UCC stands for Uniform Commercial Code.   A UCC lien means that a lien has been placed at the State on some asset, either tangible or intangible, at a company.    A UCC blanket lien means that a lien has been placed on all assets, furniture, fixtures, and equipment.  This is how the lien is generally listed at the state.   Further details of the lien will vary based on the lender.   Often the lender will write in specific details, which may include:

1.  A lien on Vehicles or a lien on Accounts receivable.

2.  A lien on any future assets, during the term of their loan

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Both of the above lien conditions can be very significant to a business and business owners should be very cautious.   If a lender puts a lien on a company’s Accounts Receivables, this means that if the company completes a job and is due a payment that far exceeds the remaining balance with the current lender, the current lender is the ultimate legal owner and legally entitled to the Accounts Receivable asset.

Frequently asked Questions, FAQ?

What are UCC blanket liens?

UCC Blanket liens are liens that lenders file that takes every asset a business has as collateral.

What does it mean to have a UCC Filing?


what is a UCC filing?

A UCC filing means that another party, usually a lender has filed a form known as a UCC form with the Secretary of State.  The form is known as a Uniform Commercial Code form.
A lien is placed on the assets listed on the UCC paperwork.   These are assets that the filer of the UCC now has ownership of.

What is a UCC form used for?

A UCC form is used to file a UCC lien with the Secretary of State.
Why are blanket liens or UCC blanket liens bad?
Many businesses consider these liens bad because the lender takes every asset the business has as collateral.   Some lenders ask for this because many borrowers will not question it.   In some cases, if the borrower simply objects, the lender will not require a blanket lien and negotiate what collateral will be used for the loan.
Blanket liens may far exceed the collateral value needed by the lender.

Most frequent requests:
I need a loan without a blanket lien on my business.
I want a business loan without a UCC lien.

What can be considered the more insidious lien is a lien on any future assets during the term of the loan.   Under this condition if the company buys 5 commercial vehicles for cash, the lender technically owns those vehicles.    If this lien condition is observed to the letter, then a business could technically not take out any future asset based loans because the newest lender will want to take out a lien on that asset and may be unaware that a previous lender has a lien on all future assets of the borrower.

There is a legal grey area even with a regular UCC blanket lien filing.    The regular UCC blanket lien says a lien on all assets, furniture fixtures and equipment.   If a business goes out and acquires another asset free and clear, then it is still a current asset, which is covered under the UCC.   If the business acquires an asset which another lender puts a lien on due to a new loan, then there may legally be an ownership conflict with that collateral.   The new lender may not have a clear legal right to that asset based on the previous lien.

In many of these cases, there are significant issues that come with the lien filings and businesses should do due diligence.