What actually happens
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1
UCC-1 filed
UCC-1 filed with Secretary of State at funding. Most borrowers never notice.
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2
Visible to lenders
Shows up when you apply for new financing. New lenders see it and require subordination or termination.
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3
Notice of assignment
Funder may send notices to your customers redirecting payments. This is when it becomes operational.
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4
Defense move
Declaratory judgment + injunction. We move within days when a notice goes out.
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5
UCC-3 termination
UCC-3 termination is filed promptly after settlement closes, written into the agreement so it isn't left to chance. The lien clears once the filing posts publicly.
01What a UCC lien actually is
A UCC-1 financing statement is a public filing made with the Secretary of State that perfects a security interest in your business assets. It is not a judgment. It does not authorize a freeze or garnishment. But it is a serious flag, to your bank, your other lenders, your investors, and your customers.
UCC liens routinely get filed on receivables, equipment, deposit accounts, and "all assets" of the business.
02Why MCAs file them
Almost every MCA contract grants a security interest, and almost every MCA funder files the UCC at the time of funding, long before any default. Most borrowers never notice.
It becomes visible when (a) you try to take new financing and the new lender finds the UCC, or (b) the funder uses it to send notices to your customers ("notice of assignment of receivables") in an attempt to redirect future payments.
03The notice-of-assignment problem
When an MCA funder sends a notice of assignment to your customers, those customers may be legally required to pay the funder directly. This kills your cash flow without any court action.
Defending this requires immediate legal action, typically a declaratory judgment suit and an injunction. We move within days when this happens.
04How to challenge a UCC filing
You can file a UCC-3 termination if the underlying obligation is satisfied or invalid. You can also dispute the filing in court if it was made improperly, for example, if the contract is unenforceable or if the funder is overreaching the actual collateral.
Most challenges happen as part of a broader settlement: as part of resolving the underlying balance, the funder agrees to terminate the UCC.
05The settlement angle
If you're settling the underlying MCA, the settlement agreement should explicitly require UCC termination within X days. Without that clause, funders sometimes drag their feet on terminating, which keeps the lien on the books long after the debt is gone.
We never close a settlement without that clause. Period.
If this is you, do these things this week
- Pull a UCC search on your business name in your state of formation.
- Identify each filing: which funder, what collateral, what date.
- If a notice of assignment has gone out to customers, call counsel today.
- In any settlement, make UCC termination an explicit, dated obligation.
- Confirm UCC-3 termination is filed promptly after payment, with a written deadline in the settlement agreement, and verify in the public record yourself.
Frequently asked
Is a UCC the same as a judgment?
No. A judgment requires a lawsuit and court order. A UCC is just a public filing of a security interest you already granted in the contract. Different tools, different consequences.
Can the funder freeze my account from a UCC alone?
Not directly. A freeze typically requires a judgment or a court order. The UCC can be used to send notices to customers redirecting receivables, that is the operational damage path, not a bank freeze.
How do I get a UCC removed?
The funder files a UCC-3 termination statement once the underlying obligation is satisfied or otherwise terminated. If you suspect the filing was unauthorized or improper, you can challenge it in court, UCC §§ 9-509, 9-518, and 9-625 govern the procedure.
Will it hurt my credit?
UCC filings don't appear on personal credit reports. They do appear on business credit reports and in lender due-diligence reports, which can affect new financing applications. Once terminated, the filing remains on the public record but shows as released.