A recent survey found that 27% of businesses weren’t able to receive the funding they needed. Financing is a critical part of building a successful business. UCC filings are an important part of the process for lenders and business owners.
A UCC search can help lenders make financing decisions. It can help business owners manage their credit reports.
Find out more about UCC filings and how a UCC search could benefit you.
What Is a UCC Filing?
A UCC filing is a notice that a creditor files. It serves as a public notice that the lender has an interest or lien against the borrower’s property. UCC filings cover commercial transactions involving lenders.
You may see a UCC filing called a UCC-1, UCC lien, or UCC financing statement.
UCC stands for Uniform Commercial Code. The Uniform Commercial Code is a set of laws that regulate interstate business transactions.
A UCC lien protects the lender. If a borrower defaults on a loan, the creditor can seize the asset used as collateral.
What Is a UCC Search?
A UCC filing search is a way to find out if a business has any UCC liens on its assets. A UCC search includes UCC financing statements as well as any amendments.
Reasons to Do a UCC Search
UCC liens are a normal part of business financing. Lenders, business owners, and anyone thinking of buying a business have reasons to do a UCC filing search.
UCC Searches for Lenders
Lenders usually conduct a UCC lien search as part of the lending process. The lender wants to verify that a potential borrower doesn’t have any preexisting liens against a collateral asset.
UCC Searches for Business Owners
Business owners should periodically do a UCC lien search. Having a UCC filing can make it harder to get a new loan or other financings. Traditional lenders like banks typically prefer borrowers without UCC liens.
Lenders sometimes don’t remove the UCC lien even after you’ve repaid the loan. A UCC search lets you verify that your creditors have removed any fulfilled UCC liens.
Buying a Business
You should do a UCC search before you buy a business. If you buy assets that have liens against them, a creditor has a claim on what you just bought. This can cause problems for you after the sale.
A UCC search helps you avoid this situation.
How to Do a UCC Search
UCC filings are public records. Most states let you search an online directory for UCC financing statements. If you don’t have experience with UCC searches, you’ll often get better results using a third-party search agency.
UCC Filings with the Secretary of State
Most UCC filings are with the secretary of state, so your search will usually start with the secretary of state’s website. The search criteria you need to use depends on which state’s website you’re searching. You may need the financial statement number or the debtor’s exact legal name.
UCC Filings with the County Clerk
Some UCC filings are with the county clerk’s office. This is often the case when the asset is real estate.
Not all county clerks have a website for online UCC searches. You may need to contact the office directly.
Professional Searching
A professional third-party UCC search service can simplify your lien search. These agencies have highly trained staff and local search agents. You can be sure you’re getting the most complete and accurate results.
Using Your UCC Search Results
A UCC search is useful for business lenders and business owners. It will also help you if you’re considering buying a business.
If your UCC search finds a lien filing, you can be glad you did the search. You’ll have the information you need to take the next steps.
Check out the rest of our business section for more practical articles like this.
