Why UCC Filing is Important and What Your Company Needs To Know

UCC Filing

When it comes to keeping your business safe, filing a UCC is one of the more straightforward steps you can take. From mitigating risk to securing the chain of rightful financial recourse, UCC filings provide a secure way to protect assets.

Curious what your company needs to know about new UCC filings? Continue reading for a brief overview of what these filings can mean for a business.

UCC Filings in Business

When it comes to mitigating risks and keeping your business safe, UCCs can play a big part in doing just that. UCCs help provide a framework for legal recourse for lenders when it comes to unpaid debts on collateral assets.

While the overall UCC framework might seem overwhelmingly complex, there are a few key points to know if you want to learn about UCC filing and how it can help your business.

From blanket liens to security agreements, multiple parts make up a UCC filing. Let’s take a look at which UCC filing might be relevant for your company.

What Your Company Needs to Know

Depending on the size of your company, you might have had to take on some financing to purchase real estate, buy necessary equipment, or even hire employees. When you enter into a financial agreement with a lender, said lender will likely file a UCC-1. They do so to protect themselves in the event a borrower is unable to pay back the loan.

UCCs do show up on a credit report, so it’s important that small businesses are aware that a filed UCC might negatively impact the credit score of their business. A few different UCC types exist, let’s quickly go over two of them: blanket liens and collateral-specific liens.

Lien Types

A blanket lien almost speaks for itself. It covers all of a borrower’s assets, such as all of the inventory and office equipment that a company owns. Blanket liens reduce a lender’s risk, making them a more preferable choice for lenders.

Collateral-specific liens deal more with securing one specific type of asset. For example, if a business purchases a corporate aircraft, the lender will file a UCC-1 outlining the aircraft as the collateral asset.

In this instance, if a company is unable to make payments on the loan for the aircraft, the lender has legal recourse thanks to the UCC filing to repossess the collateral.

How Do They Get Filed?

Depending on the state, most UCCs can be completed through an online filing system. Because the uniform commercial code is state-specific, businesses can look up their UCC filing requirements through their state’s Secretary of State online portal.

For example, California’s online website has a direct option you can choose to file a UCC information statement. Filing requirements vary from state to state, and how much money a business has to spend to file will vary as well. Per the same page, California’s fee is $5.00.

Simply search online through the Secretary of State relative to your location.

Filing Approved

Technology today makes it straightforward for businesses to search for liens filed against them and to file new UCCs to protect any collateral assets. Hopefully, this article has outlined some helpful information on what your company needs to know when it comes to the importance of a UCC filing.

For more business tips and tricks, be sure to browse through any of the articles we offer in our Business section!