UCC blanket liens
Definition of UCC Blanket Liens:
UCC blanket liens are not uncommon, especially with traditional financial institutions when filed for a business loan or personal loan. However, what are blanket ucc liens, what do they cover and what restrictions do they cause businesses?
UCC stands for Uniform Commercial Code. UCC liens are against specific assets of a person or business. Blanket UCC liens are against all assets, furniture, fixtures, and equipment. Further details of the lien will vary based on the lender. Lenders making unsecured loans such as an mca cash advance will still often claim all the other assets of the borrower including equipment and real estate. The lender will write in specific details, which may include:
1. A lien on Vehicles or a lien on accounts receivables
2. A lien on any future assets acquired during the term of the loan.
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.
FAQ, Frequently asked Questions on UCC liens and blanket liens
What is a UCC filing lien?
A ucc lien filed or blanket lien is a legal recording with the secretary of state
against the individual or business on which the lien is filed. It is legally binding and any listed assets are being held as collateral by the filer of the lien.
Where are UCC liens filed?
UCC liens and blanket liens are filed at the state. The recording is listed with the secretary of state of each state.
How do I get rid of a UCC filing?</h5
You can get rid of a ucc lien filing by paying off and satisfying the debt or contract against which the lien was placed. The lien holder will often automatically file a release of lien upon satisfaction. You should request a release of lien letter. Ask the lien holder if they will release the lien and when. After that date check with the secretary of state to verify that the lien has been released. If not, provide the lien release letter to the secretary of state and request they remove the lien against you immediately.
What is a blanket lien?
A blanket lien is a lien filed against all assets, furniture, fixtures and equipment that a borrower has. It means the lien holder has everything the borrower owns as collateral. In the event of a default, the lien holder can take legal action to repossess and liquidate the assets.
A lender has all of my personal and business assets under a ucc blanket lien. Can I get another loan before the blanket lien is released?
It is up to the new lender to decide what collateral to take for any additional loan and perform due diligence to verify what assets you have available for collateral. If the new loan requires assets already pledged under your first ucc lien, then you should let the existing lender know. Even though the new lender should verify this themselves, it will prevent the new lender from ever saying that you encumbered assets twice, which is technically illegal.
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 owns those vehicles. The business buy more vehicles then the existing lender will want a lien on that asset.
Violations of UCC liens
There is another 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 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. So 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.