Merchant Cash Advance UCC Lien Removal: What You Need to Know
If you’re a small business owner who has taken out a merchant cash advance (MCA), you may have discovered a UCC lien filed against your business. This can be a stressful and confusing situation, but don’t panic – there are steps you can take to remove the lien and regain control of your finances. In this article, we’ll dive into what UCC liens are, how they relate to merchant cash advances, and most importantly, how to get them removed.
What is a UCC Lien?
First things first, let’s define what a UCC lien actually is. UCC stands for Uniform Commercial Code, which is a set of laws that govern commercial transactions in the United States. When a lender provides financing to a business, they may file a UCC-1 financing statement, which serves as a public notice that the lender has a security interest in the business’s assets1.In other words, a UCC lien gives the lender a legal claim to your business’s assets if you default on your financing agreement. This can include everything from equipment and inventory to accounts receivable and intellectual property.
-How Do UCC Liens Relate to Merchant Cash Advances?
Now, you might be wondering how UCC liens relate specifically to merchant cash advances. When you take out an MCA, the provider typically requires you to sign a financing agreement that includes a confession of judgment (COJ) and a UCC lien(https://www.merchantmaverick.com/merchant-cash-advance-providers-file-ucc-liens/). The COJ allows the provider to obtain a judgment against you without going through the normal court process, while the UCC lien gives them a security interest in your assets.Here’s the thing – MCA providers often file UCC liens as a matter of course, even if you’re current on your payments. They do this to protect their investment and make it easier to collect if you default. However, having a UCC lien on your business can make it difficult to obtain other forms of financing, as it signals to other lenders that your assets are already spoken for.
The Impact of UCC Liens on Your Business
So what exactly does having a UCC lien mean for your business? In short, it can make things complicated. Here are a few potential impacts to be aware of:
- Difficulty obtaining financing: As mentioned, having a UCC lien can make it harder to secure other loans or lines of credit, as lenders may view you as a higher risk(https://www.nav.com/blog/what-is-a-ucc-lien-and-how-does-it-affect-my-credit-36511/).
- Damaged credit: While UCC liens themselves don’t directly impact your credit score, they can indirectly hurt your credit if you’re unable to obtain financing and fall behind on payments as a result.
- Inability to sell assets: If you need to sell business assets that are subject to a UCC lien, you’ll need to get the lender’s permission first and potentially pay off the debt in order to transfer ownership(https://www.nolo.com/legal-encyclopedia/what-property-subject-ucc-lien.html).
- Risk of seizure: In the worst-case scenario, if you default on your MCA, the provider could use their UCC lien to seize your assets and sell them to recoup their losses.
How to Remove a UCC Lien Related to a Merchant Cash Advance
If you find yourself with a UCC lien related to a merchant cash advance, don’t despair – there are steps you can take to have it removed. The process will depend on your specific situation, but here are some general options to consider:
Pay Off the Debt
The simplest way to get rid of a UCC lien is to pay off the underlying debt. Once you’ve satisfied your obligation to the MCA provider, they should be willing to terminate the lien. Be sure to get confirmation in writing that the debt has been paid in full and the lien has been released.
-Negotiate with the Provider
If you’re struggling to pay off your MCA, you may be able to negotiate with the provider to reach a settlement agreement. This could involve paying a lump sum that’s less than the full amount owed in exchange for releasing the lien. You’ll want to get any agreement in writing and make sure the lien is actually terminated before making payment.
Challenge the Lien
In some cases, you may have grounds to challenge the validity of the UCC lien. For example, if the provider didn’t follow proper procedures when filing the lien or if the debt is disputed. Challenging a lien can be complicated, so it’s best to consult with an attorney who specializes in commercial finance law.
Seek Legal Assistance
If you’re unsure of how to proceed or need help negotiating with an MCA provider, seeking legal assistance may be your best bet. Look for attorneys or debt relief companies that have experience with merchant cash advances and UCC liens specifically. They can review your financing agreement, assess your options, and advocate on your behalf.
Preventing UCC Liens in the Future
Of course, the best way to deal with UCC liens is to avoid them altogether. While it’s not always possible, there are some steps you can take to reduce your risk:
- Read financing agreements carefully: Before signing anything, make sure you fully understand the terms of your merchant cash advance, including any provisions related to COJs or UCC liens(https://www.ondeck.com/resources/ucc-liens-business-financing). Don’t be afraid to ask questions or have an attorney review the agreement.
- Keep up with payments: Staying current on your MCA payments is crucial to avoiding default and minimizing the risk of enforcement action.
- Communicate with your provider: If you’re having trouble making payments, reach out to your MCA provider sooner rather than later. They may be willing to work with you to adjust your payment schedule or come up with an alternative arrangement.
- Consider other financing options: While merchant cash advances can be appealing for their fast funding and flexible requirements, they also tend to be more expensive and riskier than traditional loans. Before committing to an MCA, explore other options like SBA loans, business lines of credit, or even personal loans.
The Bottom Line
Dealing with a UCC lien related to a merchant cash advance can be intimidating, but remember – you have options. Whether you’re able to pay off the debt in full, negotiate a settlement, or challenge the lien’s validity, the key is to be proactive and seek help if needed.At Delancey Street, we understand the challenges that small business owners face when it comes to managing debt and maintaining healthy finances. That’s why we offer personalized debt relief solutions tailored to your unique situation. If you’re feeling overwhelmed by a merchant cash advance or other business debts, reach out to us for a free consultation. Our team of experts will work with you to explore your options and develop a plan to get you back on track.Remember, you don’t have to navigate this alone. With the right support and strategy, you can overcome a UCC lien and take back control of your business’s financial future.
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