When a small business owner has a hard time paying a Merchant Cash Advance (MCA), the MCA provider will use a host of different tactics to recover their funds. One prevalent tool is the use of the Uniform Commercial Code (UCC) to go after and recover their funds. In this article, we explore the basics of UCC and provide help small business owners can learn about UCC, whether or not they have a UCC filed against them, as well as answers frequently asked questions.
By Thomas Tramaglini, Chief Operations Officer
Partner, The Center for MCA Research
What is the Uniform Commercial Code (UCC) and What is a UCC lien?
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.
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.
A UCC is nothing more than a legal form filed with the state Secretary of State (SOS) that announces that the lender or MCA provider has a secured lien on the business. Such actions allow the lender or MCA provider to seize and foreclose on the collateral or funds if the small business owner fails to pay what is due.
Does your small business have a UCC filed against it?
If you have a Merchant Cash Advance and had a hard time making your payments, the simple answer is yes, you probably do. Merchant Cash Advance companies will file UCC liens as soon as the small business owner begins missing payments. This does not mean that the MCA company will employ the tools of using UCC to recover funds, but it does begin the process where the MCA company can
How can you find out if your small business have a UCC filed against it?
The average person can look up UCC liens from Merchant Cash Advance companies by going to their state's secretary of state website and searching for the UCC search engine. Some states make it harder to find the UCC lien record so you can always use our UCC search tool for free.
What do the MCA companies hope for with UCC?
Simply put, the MCA company wants you to pay. UCC is a great way for the MCA company to gain leverage over you and your business.
When MCA companies file a UCC lien, they have a couple of goals. First, they hope to get you to settle with the MCA company, repaying them with the same or similar terms and amount originally agreed to. In most cases, the UCC settlements leave little or no room for error. Second, if you do not succumb to the UCC lien's actions the MCA company can sue you and hope to get a judgement, ultimately allowing the MCA company to recover assets, money, and more from you (garnish future earnings, etc).
UCC liens can be brutal for small business owners. From our experiences, some MCA companies and their attorneys will use UCC to freeze funds of the client, and will not release any of the funds unless fully paid off When the small business owner cannot settle for full balance, the MCA company will take what is frozen and run the small business owner into the ground.
The MCA company sued me and I settled with them. Can they still use UCC against my company?
Yes, they can use the UCC to freeze assets, redirect funds, and more.
Once a UCC has been filed against you, what do the MCA companies, their collections companies, and their attorneys next steps?
There are a couple of actions that are typical for when an MCA company has filed the UCC.
1) the MCA company will send UCC 406 letters to customers, suppliers, vendors, banks and credit unions, and anyone who pays the small business owner. Some of these small business owners find out there has been a UCC filed against them when they do not get paid, making their situation tougher than it was.
2) the UCC lien and potential freeze will come with threats to settle or see funds frozen, causing many small business owners to agree to the terms, ultimately defaulting on the settlement and losing their ability to defend themselves in case of a judgement.
3) file a lawsuit against the small business owner. Simply put, the MCA company will sue the business owner hoping for an unabated judgement, hence giving the MCA company the permission to collect your assets and more within the laws of the court.
The MCA company sued me in New York. Can they still use UCC against me?
Yes. In fact, legal action and UCC are two totally separate things.
I was sued by an MCA company and my attorney answered the lawsuit. Then, the MCA company filed a UCC for me. Is that legal?
Yes, UCC is a tool that MCA companies can use which is not associated with a lawsuit in any way. If the MCA company chooses to file UCC to gain leverage, they will.
It is imperative that a small business owner know that UCC can be harsh. The small business owner should do what they can to protect their assets and their business.
Why should we use a company like Beacon Client Solutions to deal with UCC freezes?
Beacon Client Solutions has a host of experience in working with small business owners to relieve their UCC liens. When small business owners go into UCC remediation on their own, MCA companies will take advantage of the small business owner and leave the small business owner exposed to unnecessary hazards such as default and limited curing clauses.
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 Master’s 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 our work is connected to those who are legally certified to give such advice. 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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