If you’ve applied for a business loan before, you may have come across the term UCC filing (Uniform Commercial Code filing). Many small business owners don’t realize that getting a loan with a UCC lien can impact their ability to secure future financing. But what does it mean, and how can you still access the capital your business needs?
This guide will break down how UCC filings affect your financing options and the best strategies to overcome these challenges.
What Is a UCC Filing?
A UCC-1 filing is a public record that a lender files with the state to claim an interest in a borrower’s assets. This filing protects the lender if the borrower defaults.
There are two common types of UCC filings:
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Specific Collateral UCC Filing – Covers specific assets (e.g., equipment, inventory, accounts receivable).
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Blanket UCC Filing – Covers all business assets, making it harder to secure additional financing.
How a UCC Filing Affects Your Ability to Get Business Financing
When a UCC filing is in place, it can impact your funding options in the following ways:
- Limited Borrowing Ability – Many lenders hesitate to provide funding if another lender has already placed a UCC lien on your assets.
- Higher Risk Profile – A UCC filing signals to lenders that your business already has financial obligations.
- Potential Loan Rejections – Traditional banks often reject businesses with active UCC liens, making alternative financing a better option.
How to Secure Financing Despite a UCC Filing
If your business has an active UCC filing, you still have several financing options:
1. Work with a Lender That Accepts Second-Position Liens
Some alternative lenders, like Even Funding, specialize in working with businesses that already have UCC liens. They may accept a second-position lien, meaning they’ll fund your business even if another lender has priority.
2. Seek Unsecured Financing Options
Unsecured financing options, such as merchant cash advances (MCAs) or revenue-based financing, don’t require collateral, making them a great option if a UCC filing is limiting your borrowing power.
- Best for: Businesses with strong revenue but limited assets.
3. Negotiate a UCC Filing Release or Subordination
If your original loan has been repaid or if the lender is willing, you may be able to:
- Request a UCC lien release after full repayment.
- Ask for lien subordination, allowing a new lender to take priority.
- Best for: Businesses looking to secure larger financing options.
4. Consider Invoice Factoring or Asset-Based Lending
If your business has unpaid invoices or valuable assets, you may qualify for:
- Invoice factoring – Get immediate cash by selling unpaid invoices.
- Asset-based loans – Use business equipment, inventory, or real estate as collateral.
- Best for: Businesses with outstanding accounts receivable or valuable assets.
How to Check if Your Business Has a UCC Filing
You can check for active UCC filings through your state’s Secretary of State website. Simply search by your business name to see if any lenders have placed a lien on your assets.
Final Thoughts
Getting a loan with a UCC lien is frustrating, but it doesn’t have to stop your business from accessing capital. Alternative lenders offer flexible funding solutions even if a UCC lien is in place. By understanding your options and working with the right lender, you can secure the funding you need to grow.
Need financing despite a UCC filing? Contact Even Funding today and explore your options!