Finimpact

Frequently Asked Questions (FAQ)

What are the typical types of collateral used?
UCC-1 fillings are usually required for moveable assets. Examples include vehicles, office equipment, investment securities, inventory, accounts receivables, letters of credit, and purchase orders.
What is the purpose of a UCC financing statement?
A UCC financing statement is a legal document that lenders can file to legally solidify their interest in the assets used for a borrower’s collateral. The public notice stakes the claim for the lender. But it also informs other lenders that might consider working with the same borrower.
How are UCC filings performed?
It’s the lender’s responsibility to file the UCC-1 document with the appropriate Secretary of State’s office.
How long is a UCC good for?
Typically, a UCC lien lasts for a five-year term. But if necessary, lenders can refile the document to extend this term.
How do I know if I have a UCC filing?
If you aren’t sure if your business has a UCC filing, then you can run a search through your Secretary of State’s website. The document will be filed in the state your business is incorporated in or where it is physically located.
What Are the Benefits After Filing a UCC-1?
A UCC-1 filing stakes a creditor's claim onto the asset of a borrower. As the lender, this lowers the risk of granting the loan. After all, the lender can sell the asset to recover their losses if the borrower defaults on the loan.
How Do You Remove a UCC Filing?

     Repay the loan: When you repay the loan, ask the lender to remove the lien. They can do so by filing a UCC-3 statement.

     Reach out to the Secretary of State's office: If the lender doesn’t file a UCC-3 upon repayment of the loan, then the Secretary of State's office can remove it if you swear under oath that you’ve repaid the loan.

What Is a Continuation Statement?
A continuation statement extends the lender’s lien on a borrower’s collateral. For example, if the loan isn’t repaid within the original expiration date, the lender has the right to file this statement.
What is the difference between a lien and a UCC filing?
The UCC filing creates a lien against a borrower’s collateral. The lien is the legal claim a lender has against an asset.
Why do companies file UCCs?
UCC filings secure a company's rights to your assets. If you default, this filing gives the lender a first-position lien on the collateral. Additionally, this public record can help other companies determine whether or not to grant a loan to the same borrower.
What does the UCC filing document do for a creditor?
The bottom line is that a UCC filing document legally establishes a creditor’s right to a borrower’s collateral.

Conclusion

When applying for a loan, understanding the consequences of a UCC filing can help you navigate secured loans more effectively. As you pursue a secured loan, you can be strategic about which assets you are willing to provide for collateral. Before you commit to a secured loan, explore all of your business loan options today.

About the Authors

Sarah Sharkey

Written by: Sarah Sharkey

Personal Finance Writer

Sarah Sharkey is a personal finance writer who enjoys helping people make better financial decisions.

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Somer G. Anderson Ph.D.

Reviewed by: Somer G. Anderson Ph.D., CPA

Accounting and Finance Professor

Somer G. Anderson has been working in the Accounting and Finance industries for over 20 years as a financial statement auditor, a finance manager in a large healthcare organization, and a Finance and Accounting professor at Maryville University.

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Chip Stapleton

Fact checked by: Chip Stapleton

Finance Manager

Chip Stapleton is a Series 7 and Series 66 license holder, CFA Level 1 exam holder, and currently holds a Life, Accident, and Health License in Indiana. He has 8 years of experience in finance, from financial planning and wealth management to corporate finance and FP&A.

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