Merchant Cash Advance UCC Liens
When you take out a merchant cash advance (MCA), you may encounter a Uniform Commercial Code (UCC) lien. This lien is a legal tool lenders use to secure their financial interests.
While it may seem like a routine part of business financing, UCC liens can have serious consequences if not handled properly. They can restrict your access to credit, impact your business’s reputation, and create legal challenges.
If you are a business owner considering or repaying a merchant cash advance, you might want to know about your options in case a UCC lien is filed against you. At Colonna Cohen Law, we represent business owners who deal with UCC liens or need legal help when addressing their MCA debt. Contact our team to discuss how we could help in your particular situation.
What Is the Uniform Commercial Code Lien (UCC Lien)?
A UCC lien is a legal claim a lender places on your assets. It’s filed under the Uniform Commercial Code (UCC), which regulates business loans and transactions. The UCC lien acts as a safeguard for lenders, as these liens ensure lenders can collect debts if a borrower defaults.
These liens are common in business financing, including merchant cash advances (MCAs). Lenders use them to secure their loans by claiming rights to specific assets. If you fail to repay, the lender may take those assets to cover the debt.
Some business owners have no idea their MCA agreement includes a UCC lien. These liens are often buried in the fine print, leaving borrowers unaware of the lender’s potential claim on their assets. And no wonder why this happens. When signing an MCA agreement, the borrower’s focus is usually on the funds needed, not the long-term implications.
How Do UCC Liens Work?
Merchant cash advance UCC liens are basically legal tools lenders use to secure business loans or advances. When you take a loan or merchant cash advance, the lender may file a UCC-1 Financing Statement. This filing publicly declares the lender’s claim on specific business assets or all assets.
The UCC-1 is filed with your state’s Secretary of State office. It gives the lender the right to seize the listed assets if you default. These assets could include equipment, inventory, or accounts receivable, depending on the agreement.
Once a UCC lien is filed, it becomes a public record. Other lenders or creditors can see it and may view your business as a higher risk. This can make it harder to secure new loans or lines of credit.
When the loan is repaid, the lender should file a UCC-3 Termination Statement. This document removes the lien and clears your assets. However, some lenders delay this process, which can cause ongoing issues. If that happens, you might need to protect your rights with the help of a merchant cash advance lawyer.
Types of UCC Liens
UCC liens vary based on what assets the lender is claiming. Knowing which type of lien is filed against you can help you understand its impact and your next actions. Below are the three main types of UCC liens:
- Specific collateral liens: These liens apply to specific assets like equipment, inventory, or accounts receivable. The lender only has rights to the assets explicitly listed in the agreement. This type of lien is common in loans for purchasing specific business tools or resources.
- Blanket liens: Blanket liens cover all the assets of your business, not just specific items. This gives the lender broad rights to seize anything of value if you default. Blanket liens can significantly restrict your ability to secure future financing.
- Non-purchase money liens: These liens apply to assets that weren’t purchased with the loan or advance. For example, a lender could claim rights to existing equipment or inventory already owned by the business. This type of lien can create unexpected complications during a financial dispute.
Do you know what type of lien might apply to your business? You need to review the specifics of your MCA agreement to avoid surprises and devise a plan to address any challenges. If you’re unsure about the type of lien filed against you, speak with our lawyer at Colonna Cohen Law to help clarify your situation.
Why You Should Review Your MCA UCC Lien Before Paying Anything
Paying off a debt tied to a merchant cash advance without reviewing the UCC lien can lead to unexpected issues. Many business owners rush to settle their debt, thinking it will immediately resolve all their problems. However, failing to fully understand the lien can result in paying for more than you owe or leaving unnecessary restrictions on your business.
Merchant cash advance UCC liens often contain details about the collateral a lender can claim if you default. Some lenders file overly broad liens, listing assets they’re not entitled to seize. If you pay off the debt without addressing this, the lien could remain active, or the lender could still claim rights to certain assets.
When reviewing your UCC lien, here are key things to check:
- Accuracy of the debt amount: Does the lien reflect the correct loan balance? Errors can inflate your obligation.
- Collateral listed: Is the lien claiming only the assets specified in your MCA agreement? Some lenders include assets they’re not entitled to seize.
- Termination terms: Does the lien outline how and when it will be removed after payment? You want clear terms to avoid lingering claims.
- Filing errors: Check for typos, incorrect details, or filings under the wrong business entity. Mistakes can create unnecessary complications.
If you feel like you need help reviewing your lien, our team at Colonna Cohen Law is here to help. We will examine your lien, explain its implications, and work diligently to protect your business’s interests.
What Do You Do if Your MCA Lender Files a UCC-1 Lien Notice Against You?
Many business owners are surprised to find out about a UCC lien during their next loan application. This often happens when borrowers ignore the MCA lender’s UCC-1 lien notice. But what is this UCC-1 lien notice and what does it mean if you get one?
If you have received the lien notice, stay calm and review it carefully. Check if the information matches your agreement, including the loan amount and collateral listed. If the filing is accurate, confirm you understand the lender’s rights and obligations. Sometimes, lenders overreach by listing more assets than agreed upon. If this happens, you may need to contact a merchant cash advance lawyer to negotiate with the lender and dispute the lien.
If you feel stuck or unsure about the lien, consulting with our lawyer at Colonna Cohen Law can help. We can verify the validity of the lien, challenge inaccuracies, handle communications with the lender, and protect your rights.
Impact of UCC Filings on Business Credit
A UCC filing can have a tremendous effect on your business’s credit profile. When lenders file a UCC lien, it becomes part of the public record, which means other lenders can see it and may be more reluctant to lend you money.
This can make it harder to secure additional financing or negotiate favorable terms. That’s because other lenders might assume your business already has heavy debt obligations. Even if you’re making payments on time, the mere existence of the lien could still raise red flags.
Merchant cash advance UCC liens can also affect your ability to sell or lease certain assets. Some transactions require clear ownership, which may not be possible with a lien in place. This can create unexpected hurdles for business growth and operations.
Have you noticed lenders treating you differently after a UCC filing? If so, addressing the lien could help restore your business’s credibility. At Colonna Cohen Law, we can help you understand your options for removing or resolving the lien quickly to improve your financial opportunities and protect your future.
How to Remove a UCC Lien
Removing a UCC lien starts with paying off the debt tied to it. This is usually the first step—that, of course, if the filing is accurate. Once the debt is fully repaid, the lender should file a UCC-3 Termination Statement. This document officially releases the lien and clears your business records.
However, some lenders delay or fail to file the termination statement. If this happens, a merchant cash advance lawyer can represent your interests and request the lender to complete the process promptly.
If the lien is incorrect or fraudulent, you can challenge it through legal channels. You will need to gather evidence showing the lien’s invalidity and present it to the appropriate authority. At Colonna Cohen Law, we guide businesses through the process of removing UCC liens. Whether it’s negotiating with lenders or filing legal challenges, we work to protect your interests. about a provider or agreement, contact our merchant cash advance lawyer at Colonna Cohen Law to seek advice. Call 917-740-2077 or reach out via our website for a case review.
Frequently Asked Questions (FAQs) About Merchant Cash Advance UCC Liens
UCC liens often raise questions about how they work, what they can impact, and how to protect your rights. Whether you’re dealing with a lien or worried about the potential effects on your assets, understanding the basics is key. In this FAQ section, we address some of the most common questions that we—here at Colonna Cohen Law—hear from clients that deal with merchant cash advance UCC liens.
No, a UCC lien itself cannot take money directly from your bank account. A UCC lien gives a lender rights to the assets listed in the filing, such as equipment or inventory. However, if your MCA agreement lists receivables or bank deposits as collateral, the lender may pursue legal steps to claim those funds.
A UCC lien cannot directly freeze your bank account with one exception. If the lien includes your receivables or deposits, the lender might seek a court order to freeze or access your account. This typically happens if you default on your MCA or loan.
A UCC filing can impact your ability to get future loans or credit. It signals to other lenders that your assets are already claimed by someone else. Depending on the lien terms, it can also limit your ability to sell or use certain assets freely.
The Uniform Commercial Code primarily governs transactions involving personal property, not bank deposits. However, if deposits are listed as collateral in a UCC lien, lenders may claim rights to those funds through legal action. Always review your MCA agreement to see what’s included.
To stop a lien from affecting your bank account, address the underlying debt immediately. This might involve paying off the debt or negotiating with the lender for a resolution. If you believe the lien is invalid, you can challenge it in court or with the assistance of a lawyer.
If your account is frozen, you have the right to know why and challenge the action. Contact your bank to confirm the freeze and request documentation. If the freeze is tied to a lien or legal action, consult a lawyer to explore your options for lifting it.
No, a UCC lien cannot directly garnish your wages. Wage garnishment requires a separate legal process, typically involving a court order. However, if the lien covers receivables or income, the lender may attempt to claim those funds through other legal means.
Our Merchant Cash Advance Lawyer Can Help with UCC Liens
Dealing with a UCC lien tied to a merchant cash advance can feel like a heavy burden. Maybe you’ve been blindsided by its impact on your credit or business operations. Or perhaps you’ve just discovered a lien you didn’t even know existed. Either way, it’s frustrating, and it can feel like there’s no clear way out.
But there may be a way out. At Colonna Cohen Law, we know what you’re dealing with. We have helped countless business owners like you navigate UCC liens, resolve disputes, and protect their businesses. Whether you need to challenge a lien, negotiate with a lender, or simply understand your options, we are here to guide you.
Don’t let a UCC lien define your business’s future. Contact Colonna Cohen Law today, and let’s tackle this together. Your business deserves a fresh start, and we’re here to help make that happen. Call at 917-740-2077 or contact us via our website to schedule a consultation.
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If your business is struggling with Merchant Cash Advance lawsuits, frozen accounts, UCC liens or collection actions, please contact Colonna Cohen Law to provide relief and protect your livelihood.
