UCC Financing Statement Guide for Small Business Owners
Learn what a UCC Financing Statement means for your small business, how it affects your ability to secure loans, and what you need to know as a business owner seeking capital.
Introduction
A UCC Financing Statement is a legal form that creditors file to give public notice that they have an interest in the personal property of a debtor (in this case, your business). When you secure a business loan using your business assets as collateral, your lender will typically file a UCC Financing Statement to establish their legal claim to those assets if you default on the loan. Understanding UCC filings is crucial for small business owners, especially when seeking financing for growth or startup capital. This guide will help you navigate what these filings mean for your business, your rights, and your ability to secure additional funding.
Key Things to Know
- 1
A UCC Financing Statement creates a public record of debt secured by your business assets, which can affect your ability to obtain additional financing.
- 2
Blanket liens cover all business assets and can significantly restrict your financial flexibility, so try to negotiate for specific collateral when possible.
- 3
UCC filings expire after five years but can be renewed by the lender. Make sure terminated loans are properly removed from UCC records.
- 4
Lenders establish priority based on the order of UCC filings, with the first to file having first claim to the collateral if you default.
- 5
You can request subordination agreements from existing lenders to help secure additional financing when needed for business growth.
- 6
Regular monitoring of UCC filings against your business helps prevent errors that could complicate future financing efforts.
- 7
Some alternative lenders and community development financial institutions may offer more flexible terms regarding UCC filings for small businesses, particularly MWBEs.
Key Decisions
UCC Financing Statement Requirements
The exact legal name of the debtor as it appears on formation documents. For registered organizations, this must match the name on file with the Secretary of State. For individuals, use the name on a driver's license or other government-issued ID.
The complete mailing address of the debtor, including street address, city, state, and zip code.
Specify the type of organization (corporation, LLC, partnership, etc.) if the debtor is a registered entity.
The state or country where the debtor entity is organized if the debtor is a registered organization.
The organizational identification number assigned by the jurisdiction of organization (if applicable).
Information for any additional debtors, including their exact legal names and addresses. Each additional debtor requires the same level of detail as the primary debtor.
New Hampshire Requirements for UCC Financing Statement
New Hampshire has adopted Article 9 of the Uniform Commercial Code governing secured transactions, which provides the legal framework for creating, perfecting, and enforcing security interests in personal property.
UCC Financing Statements in New Hampshire must be filed with the Secretary of State's office, which serves as the central filing office for all UCC filings in the state.
The financing statement must provide the correct legal name of the debtor. For registered organizations, this must be the name on the public organic record filed with the NH Secretary of State.
The financing statement must contain a description of the collateral covered by the financing statement that reasonably identifies what is described.
A financing statement is effective for a period of five years after the date of filing, after which it lapses unless a continuation statement is filed.
A continuation statement may be filed only within six months before the expiration of the five-year period of the financing statement.
A secured party may file an amendment to a financing statement to add or delete collateral, change the name of the debtor or secured party, or otherwise modify the information provided in the financing statement.
When the secured obligation is satisfied, the secured party must file a termination statement within specific timeframes depending on the type of transaction.
New Hampshire requires payment of specific filing fees for UCC financing statements, amendments, and other related filings as established by the Secretary of State.
New Hampshire accepts electronic filing of UCC financing statements through the Secretary of State's online filing system.
Federal tax liens must be filed in accordance with both federal requirements and New Hampshire's system for recording such liens.
For goods that are or are to become fixtures, a financing statement must be filed in the office designated for the filing or recording of a mortgage on the related real property.
The priority of security interests is generally determined by the time of filing or perfection, with specific rules for purchase-money security interests and other special cases.
UCC filings must comply with federal bankruptcy law, which may affect the enforceability of security interests if the debtor files for bankruptcy protection.
Special rules apply to security interests in farm products, requiring compliance with both the UCC and the federal Food Security Act.
Special rules apply to security interests in consumer goods, including requirements for description and limitations on after-acquired property clauses.
The UCC provides specific rules for the rights and remedies of secured parties upon default, including the right to repossess and dispose of collateral.
A debtor may file a correction statement if the debtor believes that a record indexed under the debtor's name is inaccurate or was wrongfully filed.
New Hampshire has adopted the Uniform Federal Lien Registration Act, which governs the filing of federal tax liens and other federal liens in the state.
The UCC overrides certain contractual restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes.
Frequently Asked Questions
A UCC Financing Statement (also called a UCC-1) is a legal document filed by creditors to publicly announce their interest in the assets of a debtor. It's named after the Uniform Commercial Code, which standardizes business laws across states. When you use business assets as collateral for a loan, your lender files this form with your state's Secretary of State office. The filing establishes the lender's security interest in your business property and determines priority among creditors if multiple lenders have claims against the same assets.
A UCC filing can affect your business in several ways: 1) It encumbers the assets listed as collateral, meaning you cannot sell them without the lender's permission; 2) It may limit your ability to obtain additional financing since those assets are already pledged; 3) It establishes a public record that other potential lenders can see when evaluating your creditworthiness; 4) If you default on the loan, it gives the lender legal rights to seize the collateral assets. However, UCC filings are standard practice in business lending and don't necessarily reflect negatively on your business.
While UCC filings work the same way for all businesses, minority and women business owners (MWBEs) should be aware of certain considerations: 1) Some MWBE-focused lenders may offer more flexible terms regarding collateral requirements; 2) Certain MWBE loan programs through the SBA or community development financial institutions may have different UCC filing requirements; 3) Understanding UCC filings is particularly important if you're using alternative financing methods that are common among underserved business communities. Consider consulting with financial advisors who specialize in working with MWBEs to understand how UCC filings might impact your specific situation.
A UCC Financing Statement can cover virtually any type of business personal property, including: equipment, inventory, accounts receivable, furniture, vehicles, intellectual property, and even future assets your business may acquire. The filing can be specific (listing particular items) or blanket (covering all business assets). For small business owners, it's crucial to understand exactly what assets are being used as collateral and how that might affect your operations if you need to sell or replace those assets.
A UCC Financing Statement typically remains in effect for five years from the date of filing. After that, it automatically lapses unless the lender files a continuation statement before the expiration date. If you pay off the loan before the five-year period ends, the lender should file a UCC-3 Termination Statement to remove their claim on your assets. As a business owner, it's important to verify that terminated loans are properly removed from UCC records, as outstanding UCC filings can complicate future financing efforts.
Yes, you can still obtain additional financing with an existing UCC filing, but it may be more challenging. Your options include: 1) Seeking loans using assets not covered by the existing UCC filing; 2) Negotiating with your current lender to subordinate their position (allowing another lender to take first position on certain assets); 3) Finding lenders willing to take a secondary position; 4) Using alternative financing methods that don't require collateral, such as revenue-based financing. For business owners seeking expansion capital, it's important to maintain clear records of your existing obligations and available unencumbered assets.
If you discover errors on a UCC filing against your business, take these steps: 1) Contact the lender immediately and request they file a UCC-3 Amendment to correct the information; 2) If the lender is unresponsive, you may need to file a correction statement with your state's filing office explaining the error; 3) In cases where a UCC filing should have been terminated but wasn't, send a written demand to the secured party requiring them to file a termination statement; 4) If necessary, consult with a business attorney who specializes in secured transactions. Monitoring UCC filings against your business regularly is a good practice for all business owners.
As a first-time business owner, consider these points before agreeing to a UCC filing: 1) Understand exactly which assets are being used as collateral; 2) Be wary of blanket liens that cover all business assets, as they can severely limit future borrowing options; 3) Negotiate for specific collateral when possible rather than all-encompassing liens; 4) Ensure the loan agreement includes clear terms for removing the UCC filing once the loan is paid; 5) Consider how the encumbered assets might affect your business operations and growth plans; 6) Compare loan offers from multiple lenders, as UCC requirements can vary significantly.