Yes, they are legal, and they’re often used in MCA’s. Lenders who offers MCA’s use UCC liens, in order to secure their funds. A UCC lien is a legal notice that was filed by a creditor who was hoping to protect their claim on a business’s property or other collateral, such as receivables, and assets, funds, etc. This means creditors, who are often lenders or suppliers, are using the Uniform Commercial Code (UCC) to secure their interest in what you own, because they have a stake in it. Often, they’ll do it because you owe them money. They gave you equipment, or money.

A UCC lien, that was created under federal guidelines, is recognized by laws that come from each state’s adoption of the UCC. If you want to learn more about these rules, you can check the Uniform Commercial Code on the Cornell Law School’s website.

When you have a UCC lien on your business, the implication is that it can limit your ability to get new financing or sell your property freely. This is a massive issue for many business owners who might already be over their head with existing debt – but they need more money, and are looking to borrow more money, or finance more equipment. Some entrepreneurs discover that they can’t get an SBA loan or a merchant cash advance because of these liens, and until they get them waived – there is no way out!

WHY DO UCC LIENS EXIST?

A UCC lien, that was filed by a lender or supplier, happens because the lender wants an record of its secured interest in your receivables/assets. This approach is used by big lenders like OnDeck and Kabbage, or by smaller lenders who are trying to protect themselves in case you decide not to pay back the money.

The consequence of having a UCC lien is that your business might look risky in the eyes of potential lenders, or financers. For example, if you have taken an MCA and there’s a UCC lien, and want another loan – then those new prospective lenders will see it. It may also weaken your negotiating power with vendors, since they see a recorded claim that can lead to repossession of assets if you default.

From the lender’s perspective, it’s crucial to file a UCC lien. They view it as a fundamental right that helps them protect their financing. From the borrower’s perspective, this might feel restrictive – because it gets in the way of other financing you want. Also, it’s public record – so it looks bad reputationally. Regardless of this push-and-pull, UCC liens are legal—unless they’re filed improperly or fraudulently.

WHAT HAPPENS IF A CREDITOR FILES A FRAUDULENT UCC LIEN?

A fraudulent UCC lien, that was placed with false information, can lead to penalties. According to agencies like the Federal Trade Commission, any act of fraud can result in potential criminal charges. This consequence can include fines, or in more severe cases, imprisonment for the parties who filed the lien in bad faith.

PENALTIES, CRIMES, AND PUNISHMENT

Penalties for wrongful UCC filings vary by state. In some cases, if a person or business files a UCC lien that was based on deception, they might face civil lawsuits and have to pay damages for the deception. That means they could lose money and even face major legal trouble. In extreme situations, prosecutors might bring criminal charges, which could result in jail time.

When the government finds that a person or entity knowingly submitted false ucc lien forms, there is a possibility of heavy fines and restitution orders. This means the court could force the filer to repay any harm they caused, which might be massive.

STRATEGIES OF HOW WE’D DEFEND YOU WITH UCC LIENS

At DelanceyStreet.com, we are rooted in helping business owners who find themselves in trouble, dealing with UCC liens. We know that in some cases, the lien was filed by a lender who was doing it to protect their collateral. Other times, it might have been filed in error or without proper cause. We look at every angle because every lender has different motivations. Some lenders will improperly file the lien in order to extort you and get somthing out of you.

1. Investigation
   We begin by reviewing every document that was related to the lien, so we can see if the lender’s claim was valid. If there was a mistake, we try to get it corrected immediately.

   The consequence is that an accurate investigation can uncover if the lien was an honest error or an attempt to squeeze you unfairly.

2. Negotiation
   We make contact with the creditor and attempt to negotiate a resolution. Our team, that was trained in business debt relief, will work with them to remove or reduce the impact of the lien.

   The consequence of proper negotiation is that you might get a release of the lien or a more favorable repayment plan.

3. Legal Action
   If the creditor refuses to cooperate, we consider legal remedies. This could mean filing a motion to invalidate the lien if we believe it was fraudulent or in violation of the UCC.

   The consequence of legal action is that you stand a chance of clearing your business record and preventing the creditor from seizing your assets.

We are here to handle complex issues like business debt consolidation, credit card debt, merchant cash advances, and more. Our team, that was led by our Chief Legal Officer Steven Raiser, knows how to deal with creditors on a first-name basis.

POTENTIAL CONSEQUENCES IF THE LIEN IS NOT ADDRESSED

When you ignore a UCC lien, the implication is that the creditor might decide to seize your business assets. In extreme situations, you risk lawsuits, which can drain your company and push you closer to bankruptcy.

Ultimately, a UCC lien that goes unchallenged can harm your daily cash flow. That means your monthly obligations might get harder to meet, especially if your revenue decreases – and then you try to borrow more money, but you’re unable to borrow the money due to the UCC lien.

HOW OUR TEAM CAN HELP YOU RIGHT NOW

We, at DelanceyStreet.com, are a top tier business debt relief company based out of NYC. We help clients nationwide. We can investigate the specifics of your lien, provide guidance on whether it’s valid, and develop a legal strategy aimed at removing or reducing its impact. If you’re facing lawsuits over the lien, our legal team can represent you, protecting your interests and working toward a settlement or dismissal.