Most people who are having trouble paying their Merchant Cash Advances (MCAs) have no idea whether they have had a UCC lien filed against them. The UCC is a powerful tool that MCA companies use to exert their leverage in recovering their funds by freezing your bank accounts and credit card processing, stopping your contracts, harassing your customers, and scaring your employees. In most cases, MCA companies use the UCC without the client knowing what is going to happen and when the small business owner learns what is going on, its too late. So, we created a FREE Do It Yourself Tool (link at the bottom of this article) for small business owners to see if they have had a UCC filed against their business so small business owners can protect themselves.
By Thomas Tramaglini, Chief Operations Officer
Uniform Commercial Code (UCC): The Tool MCA Companies Use to Recover Their Funds
The Uniform Commercial Code (UCC) is a group of laws that relate to commercial transactions that are accepted by all states in the United States. UCC filings are used by lenders and Merchant Cash Advance companies to announce their rights to collateral or liens on a loan or tangible property.
And a UCC filing, or lien are used by lenders and MCA companies to announce their rights to collateral, liens, or a secured interest. In the context of a Merchant Cash Advance, MCA companies will secure your receivables as a form of collateral using the Universal Commercial Code.
MCA Companies File UCCs Without Telling You But You Have Already Given Permission
We have written extensively covering UCC liens and what types of permission you give
the MCA company once you have. For instance, in The Complete Guide to MCA: What is a UCC Lien? We detailed both specific collateral and blanket liens (more prevalent) for which once is likely already filed against you. In The Complete Guide to MCA: UCC Filings, We also detailed the types of clauses which MCA companies throw into Agreements with Clients which basically outlines how small business owners will be held accountable by the companies.
Basically, while some MCA companies may attempt to sue you to recover their funds, a sure handed way to secure funds is through the use of the UCC.
Most Small Business Owners Do Not Know If They Have Had a UCC Filed Against Them
Have you had trouble paying your MCA or have you stopped payments?
If so, the MCA company you have in your portfolio most likely has already filed a UCC Lien against you. What happens next is the question.
How can UCC liens affect your business?
UCC liens identify to others that you have a security interest lien.
Prevents additional borrowing.
Negative credit on your business credit
Assets that are pledged for recovery.
MCA Company Actions:
Harass your suppliers.
Harass your customers.
Freezing your customer payments
Freezing your assets
Freezing your bank accounts
Holding funds collected by your credit card processor.
Holding funds with a licensing agent
Many others...
406 Notices: You DO NOT Want Them Going Out
Once you have a UCC filed against your business, MCA companies may send Section 406 letters notifying your customers, suppliers, bank, credit card processor, etc. that you have a lien placed against you at your State’s Secretary of State and that they are not to send you the funds or supplies you have ordered until your debt is fulfilled.
Once these notices go out, unless you have protected yourself, you are at a loss for any type of leverage and need to settle or face recovery of those funds by the MCA company or potentially going out of business.
What Happens if You Have a UCC Notices Go Out?
While some industries are trickier to handle than others, once you have a UCC filed and notices go out, you need a professional. Some strategies include working out the details with the lender using our team or one of our attorneys but overall, just calling and settling so the MCA company lifts the UCC hold is usually the last line of defense. The bottom line is that you need a professional to handle this ASAP.
Contact Beacon Client Solutions to better understand your situation and how we can help you.
Dr. Thomas Tramaglini is the Director of Operations and Negotiation for Beacon Client Solutions, a company that supports small businesses on a host of fronts, especially MCA debt. Thomas has been a small business owner for many years, as well as held leadership positions in several organizations and companies. Thomas holds a B.A. in History, as well as Masters and Doctorates in Organizational Leadership from Rutgers University, The State University of New Jersey.
Disclaimer: Beacon Client Solutions is not an accountancy, or a law firm. We are business consultants. While Beacon works with outstanding attorneys and accountants, we cannot and do not provide legal or tax advice. All of our work is connected to those who are legally certified to give such advise. Beacon does have a longstanding body of work in MCA resolution and understands what small business owners deal with, specific to MCA. Beacon Client Solutions serves clients in all 50 states, Puerto Rico, Mexico and Canada.
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