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UCC Filing Explained & How to Remove it from Your Credit Report

UCC Filing Explained & How to Remove it from Your Credit Report

In the business world, credit is of utmost importance. It’s a critical part of the main ingredients for business growth. Good credit history and a decent score can get you access to funding when you need it. That along with collateral are what creditors look for most before taking the risk of lending you money. If you’re in the position of putting up collateral, you should know what is a ucc filing on a credit report.

UCC Filing Explained

Uniform Commercial Code (UCC) filing is collection of laws to make business processes more efficient and standard in all states and several territories in the United States. What you should focus on as an entrepreneur is that this code has regulations in place to protect debtors and creditors. For most business owners, at some point you could be either or both. There are benefits and drawbacks to the filing with money and credit, which is why you should understand the important parts of UCC.

What is a UCC Filing on a Credit Report?

The UCC-1, or Financing Statement, is the filing on a credit report that affects entrepreneurs. It announces to the world what secured loan agreements you have with a creditor having interest in the property. Credit reports, like Experian Business Credit, show the most recent original, amended or terminated filings up to the last 10 or the past five years. When a creditor pulls your business report, they can see what assets already have UCC-1 filings connected. If the collateral you’re pledging already has a primary on it, that lender may not want to be second on the list.

Let’s say you’re opening you’re expanding your spa business and need new equipment. You took advantage of equipment financing last time, which uses the items you purchase as collateral for the loan. You plan to use that same equipment as part of a secured loan for the new items. That means you’ll have another UCC filing on your credit report.

It’s important to note that creditor’s can files UCC-1 against one asset or do a blanket assignment. With that, lenders have the right to seize all business collateral assets in the event of non-payment. Make sure you know which one you’re agreeing to when discussing the terms of the loan.

How UCC Filing Works

In most states, lenders can file a UCC-1 on the office of the Secretary of State (SOS). For some, they will file in the county. For a company with locations across several states, the lender may file in each state. The cost is $25 or less for an invaluable amount of protection. They can also review a company’s most recent history of UCC filings before making a credit decision.

What Happens When an Entrepreneur or Business Owner Has a UCC Filing?

A UCC filing can have both positive and negative effects. It depends on which side of the filing you’re in as an entrepreneur or business owner. Either way, it can impact your cash flow and receivables. If you have a UCC filing on your credit report, it can affect your working capital and ability to get additional business funds.

Lenders may not see a UCC filing on their credit report as a positive action. Especially when they are working on getting more funding to expand business ventures. In a case where they have one type of financing, but need additional the filings may bring their mission to a halt. Lenders may not want to take a risk on someone who has too many stakes on their assets. That could leave you without working capital.

As a creditor, it could save you valuable time and money. You’ll know ahead of time the status of the collateral. Getting information about how many UCC filings a business has and who has claims on the collateral helps you make a well informed decision about the company you’re considering doing business with. UCC-1 filing can prevent you from going through a lengthy court process to recover funds. You can start the process of taking possession of the secured interest, sell it and use the proceeds toward the debtor’s balance. It also lets the debtor know you’re serious about the risk you’re taking, which may urge them to maintain their payments.

How to Remove a UCC Filing from Your Credit Report

Understanding what is a UCC filing on a credit report is crucial for business success. As a lender, it gives you an added layer of protection. It may give you the leverage you need to negotiate and secure much needed funds as a borrower. As a growing entrepreneur, you still may not see it as beneficial, especially if it’s blocking your financial progress. In that case, you should follow the recommendations for how to remove a UCC filing from your credit report.

Ask the lender to file for its removal. They can do so by filing a UCC-3 Financing Statement Amendment.

Wait it out. The UCC will show on your report for five years. Depending on how long you’ve been dealing with the lender, most of this time may have already passed. Within a few months, you may be able to see the filing removed. Review your report periodically to make sure each bureau removes the data accordingly.

Swear an oath of full payment at your SOS office. This won’t exactly remove the UCC -1 from your credit report, but it will show potential creditors that you have satisfied the loan payments.

Read the fine print on loan applications and contracts.

Getting close to having the business loan you need can be an anxious time. Don’t let that cause you to overlook important details. Some lenders have it in their application to authorized UCC-1 filing. It can happen even if the owner isn’t a signer on the application. All it takes is an officer or other authorized personnel. If you choose not to do the loan or go with another lender, that could be a problem. Don’t agree to any filing until you’ve signed for and received the loan. That prevents the hassle of trying to track the lender down to remove a UCC filing for a loan you never received.

Consider Unsecured Business Credit

Are you concerned about the effects of UCC-1 filing on your credit report? You have other options. Unsecured business credit gets you financing without the need for collateral. That means no worries about removing a UCC filing down the road. Before making any decisions, speak with a credit expert. With them you can learn more about what is a UCC filing on a credit report. They’ll also help you sort out the best financing options to support your growth strategy.

About Brittni Abiolu

Brittni AbioluBrittni is a millennial, entrepreneur, investor and philanthropist. She has a Bachelor of Science in Computer & Information Systems from the University of Detroit Mercy and is currently a student in the Master of Entrepreneurial Transactions program at Central Michigan University. She enjoys writing about her experiences over the past 10+ years as an entrepreneur and uses data and information from reliable sources to back up what she writes about. Through her writing she aims to educate other entrepreneurs on how to obtain capital and build successful businesses doing what they love.

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