UCC liens and MCAs: what that filing really means
Almost every MCA funder files a UCC lien against your business the day you're funded. Most owners discover it later, usually at the worst moment. Here's what the lien does, what it can't do, and how it comes off.
What a UCC-1 filing actually is
A UCC-1 financing statement is a public record saying the funder claims a security interest in your business assets, usually receivables, equipment, and inventory.
By itself it takes nothing from you. It establishes the funder's place in line and warns other lenders that your assets are spoken for. That's why a business with an active MCA lien struggles to get bank financing: the collateral is already claimed.
The lien becomes a weapon after a claimed default. That's when some funders send notification letters to your customers and processors, redirecting your receivables. If you're seeing that, or a funder is threatening it alongside a confession of judgment, the response window is now, not next quarter.
What a lien can and can't do
How MCA funders actually use UCC liens
Priority marker
Filed at funding to claim first position on your assets. Routine, automatic, and on the public record before your first draft clears.
Financing blocker
Banks search UCC records before lending. An active MCA lien usually means "no" from conventional lenders, trapping you with MCA-style funding.
Revenue interceptor
After claimed default, notification letters can redirect customer payments and processor deposits. Disruptive, embarrassing, and very negotiable.
Pressure tactic
The threat of customer letters is often used to force payment terms. Knowing what the lien actually permits keeps the threat in proportion.
How liens come off, step by step
Know what's filed
UCC records are public and searchable by state. We pull every active filing against your business on the first review.
Resolve the debt
Through settlement, each balance is negotiated and resolved, with lien release written into the agreement.
UCC-3 termination
The funder files the termination statement. We verify it actually happens; "we'll get to it" is not a release.
Doors reopen
With liens cleared, conventional financing and clean exits become possible again.
UCC lien FAQ
A UCC lien is a public notice, filed as a UCC-1 financing statement, that the funder claims a security interest in your business assets, typically receivables, equipment, and inventory. Most MCA funders file one at funding as standard practice. It's not a judgment and not a seizure; it's a recorded claim that establishes priority.
After a claimed default, some funders send UCC notification letters to your customers or payment processor, directing money owed to you to the funder instead. This is the most disruptive use of a lien, because it interrupts revenue and tells customers you're in distress. It's also frequently resolved through negotiation, since funders prefer a payment plan over strangling the business they're collecting from.
No. A UCC filing is routine paperwork at funding and is not litigation. But after default, lien-based pressure often precedes or accompanies escalation, so a new filing or notification letters are signals to act, not panic.
The funder removes it by filing a UCC-3 termination once the debt is resolved, paid, settled, or otherwise released. Getting lien terminations in writing is a standard part of every settlement agreement we negotiate. Liens can also lapse after five years if not continued, but waiting out a lapse is not a strategy.
It's harder. Lenders and buyers search UCC records, and an active MCA lien signals existing claims on your assets, which blocks most conventional financing and complicates sales. Clearing liens through settlement is often what reopens those doors.
Find out what's filed against your business.
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