What Is a UCC Lien?
A UCC lien, short for Uniform Commercial Code lien, is a legal claim filed by a creditor to secure repayment from a borrower. This filing is recorded publicly and gives the creditor an interest in the borrower’s assets, typically in the event of non-payment or default. These liens are especially common in Merchant Cash Advance Liens, where funders use UCC filings to protect their financial stake in a business.
Once a UCC lien is in place, it can restrict access to traditional financing and hinder the sale or transfer of business assets. For many business owners, the lien remains unnoticed until a loan is denied or a due diligence process exposes the record.
How a UCC Filing Works
When a business enters into a financing agreement, such as a loan or a merchant cash advance, the lender may file a UCC-1 statement with the Secretary of State. This document outlines the creditor’s rights to specific collateral — like inventory, equipment, or receivables.
For example, a UCC filing Alabama might include a business’s entire asset base, making it difficult to obtain additional funding. These filings are accessible by the public and are often used by financial institutions to evaluate creditworthiness. While the initial intent is protection for the lender, it can severely limit a business’s flexibility.
Common Problems Caused by UCC Liens
UCC liens can lead to a variety of operational challenges:
- Funding Roadblocks: Lenders typically avoid businesses with outstanding UCC liens, considering them higher-risk.
- Vendor Restrictions: Suppliers may hesitate to provide credit if a lien suggests financial instability.
- Asset Limitations: Selling or transferring collateralized property may not be possible without clearing the lien first.
In some cases, funders file liens even when they don’t have a legitimate security interest, particularly in the MCA industry. This is where legal intervention becomes necessary.
Can You Remove a UCC Lien?
Yes — but it must be done legally and strategically. Here are a few recognized methods:
- Repayment and Release
Once the obligation is fulfilled, the creditor should file a UCC-3 termination statement. Unfortunately, some creditors delay or avoid doing this unless prompted by legal pressure. - Challenging a Wrongful Lien
If the lien was filed without proper authority — for example, if a merchant cash advance company claims a secured interest that doesn’t legally exist — an attorney can file a correction or take court action. - Negotiated Settlements
In cases of default, a negotiated settlement might be the most effective route to lien removal. This often involves reducing the total obligation and securing a termination agreement as part of the resolution. - Filing a Statement of Correction
If the lien contains errors, you may file a correction to notify interested parties. While this doesn’t remove the lien, it helps clarify inaccuracies on record.
Don’t Let a UCC Lien Threaten Your Business Future
UCC liens are more than just paperwork — they can derail growth, affect partnerships, and scare off investors. If your business is facing unjustified or lingering liens, especially from merchant cash advance funders, legal intervention may be the only way to fully resolve the issue.
Conclusion: Get Legal Help from Experienced Attorneys
Whether you’re dealing with aggressive funders, wrongful filings, or simply want to clear your business record, professional legal assistance can make all the difference. Grant Phillips Law specializes in resolving complex UCC lien disputes, merchant cash advance issues, and debt restructuring—offering clear, strategic solutions to help business owners regain control. Don’t let a lien dictate your financial future—get the support you need to move forward confidently.
