Getting Rid of Pesky UCC Filings After a Merchant Cash Advance
Dealing with a merchant cash advance can be a headache, especially when the lender slaps a UCC filing on your business. Like, those things can stick around forever, which is so annoying. This article will walk through what a UCC is, why cash advance companies file them, and most importantly, how you can go about getting rid of one.
What is a UCC Filing?
A UCC filing, or Uniform Commercial Code filing, is basically a legal claim that a lender puts on your assets. When a lender files a UCC, they are staking their claim on your property as collateral for the loan. This means if you default, they have a right to seize your assets to recoup their losses.Cash advance companies almost always file UCCs as part of their lending agreements. It‘s like their insurance policy if you don’t pay them back. Totally makes sense from their perspective, but kinda sucks for the borrower.
-Why Do Merchant Cash Advance Companies File UCCs?
There’s a few reasons cash advance lenders file these UCC filings:
- Risk Mitigation – Like I said earlier, it’s protection for them if you default. With a UCC, they can recoup their losses by taking your assets.
- Interest in Business Assets – The UCC lays out their claim to your business assets, like equipment, inventory, accounts receivable, etc.
- Senior Position – A UCC filing puts them first in line over other creditors to get paid back. They have senior claim to your assets.
So in short, the UCC filing allows them to get paid back if you stop making payments by seizing your business assets. It reduces their risk and improves their position vs other lenders you may have.
Problems with UCCs
While the UCC filing benefits the cash advance lender, it can cause some headaches for borrowers:
- Difficulty Getting Funding – Having a UCC on file can make it harder to get financing from other sources like banks.
- Foreclosure Risk – If you default, you’re at risk of having assets seized or your business foreclosed on.
- No Expiration – Cash advance UCCs don’t expire automatically, meaning they stick with your business forever unless you take action.
This last point is probably the most frustrating. Unlike normal loans that have a set repayment term, merchant cash advance UCCs have no end date. The lender is under no obligation to remove the filing when you pay off the advance.So that UCC can stay attached to your business for years, which can limit financing options, hurt your credit, make it hard to sell your business, and be a big red flag to other lenders.
-Removing a Merchant Cash Advance UCC
Now that you know what a UCC is and why they’re so annoying, let‘s talk about how to remove one after paying off your merchant cash advance.
Ask the Lender
The first step is simple – ask the lender to terminate the UCC filing. There‘s no harm in politely asking them to remove it from your business’s records.Sometimes lenders will cooperate with this request with no issues. In fact, some states actually require cash advance companies to release UCC filings upon final payment.However, most lenders will put up a fight on removing the UCC right away. They like having them in place for as long as possible as extra protection. Still, it doesn’t hurt to ask.
File Your Own UCC Termination
If asking nicely doesn‘t work, the next step is to file your own UCC termination. This removes the lender’s claim on your assets.Filing a UCC termination is easier than it sounds:
- Get a copy of the original UCC filing from your state’s Secretary of State office. This serves as your reference.
- Fill out a UCC Termination Form (UCC-3 form). This notifies the state that the original filing is no longer valid.
- File the termination form with the Secretary of State office. This usually has a small fee.
- Send a copy of the filed termination to the merchant cash advance lender. This lets them know the original filing is gone.
And that’s it – the UCC should be removed from your business‘s records after following those steps. It overrides the lender’s original filing.Now they could technically turn around and file a new UCC. But at least the original that was causing problems is terminated.
Legal Action
If filing your own termination doesn’t resolve things, the nuclear option is legal action. You can sue the merchant cash advance company and ask a judge to order the removal of the UCC filing.This should really be a last resort though. Going to court is expensive, stressful, and time consuming.But the threat of legal action alone is sometimes enough to get stubborn cash advance lenders to terminate the filing. Or at least come back to the negotiating table to work out a compromise.So pulling this card out of your back pocket might help resolve things without needing to actually set foot in a courtroom.
-Final Thoughts
Dealing with persistent UCC filings from merchant cash advances can be super frustrating. But with a little persistence and the right approach, you can get them removed from your business‘s records.The best options are:
- Ask the lender nicely to terminate it
- Do it yourself through a UCC termination filing
- Threaten legal action as a last resort
With one of those three methods, you should be able to finally get rid of that pesky cash advance UCC. Let me know in the comments below if you have any other tips!