MCA UCC Filings: What They Are and Why They Matter
If you have ever taken a merchant cash advance, there is a UCC filing on your business right now. You may not have noticed it. most business owners do not. but it is there, and it has real consequences. A UCC filing gives the MCA company a legal claim on your business assets, and it shows up every time another lender, investor, or partner checks your business background.
Understanding UCC filings is essential because they affect your ability to get future funding, they play a role in what happens if you default, and removing them after payoff is not always automatic. This guide covers everything you need to know.
What Is a UCC Filing?
UCC stands for Uniform Commercial Code, which is a set of laws governing commercial transactions across all 50 states. A UCC filing. specifically a UCC-1 Financing Statement. is a public document that a creditor files with a state agency (usually the Secretary of State) to announce that they have a security interest in your business assets.
In simple terms: a UCC filing is a lien. It tells the world that a specific creditor has a claim on some or all of your business property. If you default on your obligation, the creditor with the UCC filing has a legal right to seize those assets to recover what they are owed.
Why MCA Companies File UCC Liens
MCA companies file UCC-1 statements for two main reasons:
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Security. The UCC filing gives them a legal claim on your assets if you default. Even though an MCA is technically a purchase of future receivables (not a loan), MCA companies want the additional protection of a lien.
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Priority. UCC filings establish a "first in line" order. The first creditor to file a UCC lien generally has first claim on the assets. This matters if multiple creditors are competing for the same assets. the one who filed first gets paid first.
According to the Uniform Law Commission, the UCC framework is designed to provide clarity and consistency in secured transactions across state lines.
Blanket Liens vs Specific Liens
Not all UCC filings cover the same assets. The two main types you will encounter in MCA agreements are blanket liens and specific liens.
Blanket Liens
A blanket lien covers all of your business assets. everything the business owns now and everything it will own in the future. This includes:
- Cash and bank accounts
- Accounts receivable (money owed to you by customers)
- Inventory
- Equipment and machinery
- Intellectual property
- Vehicles
- Furniture and fixtures
Most MCA companies file blanket liens because they provide maximum protection. If you default, a blanket lien gives them a claim on essentially everything your business owns.
Blanket Liens Are the Norm in MCA
If you signed an MCA agreement, you almost certainly agreed to a blanket lien. Check your UCC filing. if the collateral description says "all assets" or "all personal property," that is a blanket lien.
Specific Liens
A specific lien covers only designated assets. for example, a piece of equipment, specific inventory, or accounts receivable only. Specific liens are less common in MCA agreements but are standard in equipment financing and some types of business loans.
| Feature | Blanket Lien | Specific Lien |
|---|---|---|
| Assets covered | All business assets, present and future | Only named assets |
| Common in MCA? | Yes. nearly universal | Rare |
| Impact on future funding | High. other lenders see all assets are encumbered | Lower. other assets remain available as collateral |
| Difficulty to remove | Same process but broader impact while active | Same process, narrower impact |
How UCC Filings Affect Your Ability to Get Other Funding
This is where UCC filings really hurt. When you apply for a business loan, line of credit, or even another MCA, the lender will run a UCC search on your business. If they find an existing UCC filing. especially a blanket lien. it creates serious problems.
Lenders See Increased Risk
An existing UCC lien tells potential lenders that another creditor has first claim on your assets. If you default on a new loan, the new lender would be second in line (or third, or fourth) to collect. Many lenders will not accept that level of risk, so they either decline your application or offer much worse terms.
Stacking Concerns
When lenders see multiple UCC filings from MCA companies, it is a major red flag. It signals that you have taken multiple cash advances. a pattern that suggests cash flow problems and increases the likelihood of default. The Federal Reserve's Small Business Credit Survey consistently shows that businesses with existing MCA obligations face significantly more difficulty accessing traditional financing.
SBA Loan Complications
If you want to apply for an SBA loan, existing UCC filings can be a major obstacle. SBA lenders typically require a first-position lien on your assets. If an MCA company already holds that position through a UCC filing, you may need to negotiate a subordination agreement (where the MCA company agrees to move to a lower priority) or pay off the MCA entirely before qualifying.
How to Search for UCC Filings on Your Business
You should know exactly what UCC filings are on your business. Here is how to find out.
Search Your State's Secretary of State Database
Every state maintains a database of UCC filings, usually accessible through the Secretary of State's website. The search is typically free or costs a small fee (usually $5 to $25). You can search by:
- Your business name (the legal name as registered with the state)
- Your personal name (if you operate as a sole proprietor)
- The filing number (if you have it from your MCA paperwork)
What to Look For in the Filing
When you find a UCC filing, pay attention to:
- Secured party. This is the MCA company or their assignee (they sometimes sell the security interest to another company)
- Collateral description. This tells you what assets are covered. "All assets" means a blanket lien.
- Filing date. Determines priority. Earlier filings have higher priority.
- Expiration date. UCC filings expire after 5 years unless renewed (more on this below)
Check Multiple States
If your business operates in multiple states or if you have taken MCAs from companies in different states, search the UCC databases in all relevant states. Some MCA companies file in their home state rather than yours.
Third-Party Search Services
If searching state databases feels overwhelming, several services will run a comprehensive UCC search for you. Companies like the International Association of Commercial Administrators maintain directories of state filing offices, and commercial search services can check multiple states simultaneously.
How Long Do UCC Filings Last?
A UCC-1 financing statement is effective for five years from the filing date. After five years, it automatically lapses unless the secured party files a continuation statement to extend it for another five years.
Here is what this means practically:
- If you paid off your MCA within five years, the filing should be terminated (removed) by the MCA company. If they do not remove it voluntarily, you will need to request termination.
- If the MCA is still outstanding after five years, the MCA company will likely file a continuation before the original filing expires to maintain their lien.
- If the MCA company forgets to file a continuation, the lien lapses automatically and they lose their secured position. This does happen occasionally, though you should not count on it.
How to Get UCC Filings Removed After Payoff
When you fully pay off your MCA, the MCA company is required to file a UCC-3 Termination Statement, which officially removes the lien from public records. However, this does not always happen automatically or promptly.
Step 1: Request a Termination in Writing
After your final payment, send a written request (email and certified mail) to the MCA company asking them to file a UCC-3 termination. Include your account number, the UCC filing number, and proof of payoff.
Step 2: Follow Up
Under the UCC, a secured party is required to file a termination statement within 20 days of receiving a written demand from a debtor who has satisfied the obligation. If they do not comply, they may be liable for damages.
Step 3: File the Termination Yourself (If Necessary)
If the MCA company refuses to file a termination or has gone out of business, you can file a UCC-3 termination yourself in some states. The process varies by state, but generally you will need to:
- Complete a UCC-3 form indicating it is a termination
- Reference the original UCC-1 filing number
- File it with the same Secretary of State office where the original was filed
- Pay a small filing fee (typically $20 to $50)
If the MCA company disputes the termination, you may need to involve an attorney or petition a court.
Step 4: Verify Removal
After the termination is filed, run another UCC search on your business to confirm the filing has been properly terminated. This is especially important if you are planning to apply for new financing.
Get Termination Before Your Next Loan Application
Do not assume the UCC filing will be removed on time. Start the termination process as soon as you make your final MCA payment. ideally several weeks before you plan to apply for new financing.
What Happens to UCC Filings If You Default
If you default on your MCA, the UCC filing gives the MCA company the right to enforce their security interest. This means they can:
- Seize business assets listed in the UCC filing (with proper legal process)
- Intercept accounts receivable by notifying your customers to pay the MCA company directly
- Sell seized assets to recover the amount owed (they must do so in a "commercially reasonable" manner under the UCC)
However, enforcing a UCC lien through asset seizure is not as simple as showing up and taking things. The MCA company must follow specific legal procedures, and you have rights throughout the process. An attorney can help you understand your options if enforcement is threatened.
Frequently Asked Questions
Does a UCC filing affect my personal credit score?
Can I get a loan with an existing UCC filing?
How much does it cost to remove a UCC filing?
Can an MCA company file a UCC lien without my permission?
What is the difference between a UCC filing and a judgment lien?
Sources
- Uniform Law Commission. UCC Article 9. The legal framework governing secured transactions and UCC filings.
- U.S. Small Business Administration. Loan Programs. SBA lending requirements including lien position expectations.
- Federal Reserve Small Business Credit Survey. Annual survey data on small business financing challenges and access to credit.
- International Association of Commercial Administrators. Directory of state UCC filing offices and resources.