Why do a ucc search

As a potential buyer, you have a few options when conducing a UCC lien search: 1 Do it yourself 2 Use a third-party service. I would advise most buyers to use a third-party service, unless they have extensive prior experience conducting UCC searches. If you opt to use a third-party service, it will be a welcome to learn that they are affordable and can generally conduct tax and judgement lien searches at the same time. As a buyer, you will have your hands full with a multitude of other tasks.

Allowing professionals to conduct the lien search for you is generally a better use of your time and efforts. What happens if the UCC search uncovers a lien filing? First, be glad you conducted the search! Next, determine if the filing has been terminated or if it is still active. If the filing has been terminated, this indicates that the borrower has paid off the debt.

However, if the statement is active then you need to work with the seller. It will be critical to ensure the lien is closed or released prior to closing the transaction. This is not an ideal situation. However, there are a few risks that should be considered when it comes to UCC lien filings. A UCC lien may prevent your business from receiving additional financing prior to repaying the debt.

The lien may reduce the chances that your business can qualify for traditional and alternative loans. As mentioned above, UCC liens are a first come, first served position. It may prove difficult, or impossible, to convince a lender with an existing lien on your assets to carve out some of their security interest for another lender. While the presence of lien will not impact your score, it may figure into lending decisions after a lender reviews the report.

When assets are pledged as collateral for a loan, the business runs the risk of losing those assets if they default. If a UCC lien is filed, then the assets used as collateral should be considered at risk until the loan is repaid. For buyers of a business, liens may pose a significant risk. A diligent buyer will conduct proper due diligence by including a UCC, tax, and judgement lien search prior to the close of every transaction.

Your legal counsel or risk management department can help you determine which option works best for your needs. This information is not intended to be legal advice.

You should not act or rely on any information contained in this presentation without seeking the advice of an attorney. Delaware Trust. Digital Brand Services. Domain management and security solutions, plus online brand and fraud protection. Global Financial Markets. Fields cannot be blank. If you see a fulfilled UCC lien still listed on your business credit report, you can contact your lender to ask them to properly close the lien. Need funding to build your business?

What You Need To Know. November 4, by SmartBiz Team. What is the Uniform Commercial Code? What is a UCC filing? How do UCC liens work? Three steps taken during UCC filings If you take out a small business loan involving collateral, your creditor will take the following steps to file a UCC lien on your company.

Provide identifying information When your creditor moves to establish a UCC lien on your collateral, they must provide relevant identifying information. Key questions to keep in mind for UCC filings Any time you provide collateral as part of a loan, you should check whether your creditor has placed a UCC filing on your company.

What is a UCC search? Why should I perform a UCC search? Can I still obtain funding with a UCC lien? Other possibilities include: Carving out assets. You can ask the creditor in control of your UCC lien to free some assets in their control for your use as collateral for other loans. Although most creditors will decline this request, you are within your rights to ask.

Refinancing loans.