Somewhere in a state database there is a public record of who has a claim on your business assets. Lenders check it before they do anything else. Most owners have never looked at it, and a meaningful number are surprised by what is there.
What is a UCC filing?
A UCC-1 financing statement is a public notice, filed under the Uniform Commercial Code, that a lender claims a security interest in some or all of a borrower’s assets. It is filed with the secretary of state where the business is organised, and it is what makes a security interest perfected, enforceable against other creditors.
It is a notice, not a contract. The loan terms live in the security agreement; the UCC-1 exists to tell the world the claim exists.
What does a UCC filing actually cover?
That depends entirely on the collateral description:
- A specific-collateral filing names particular assets, a piece of equipment, a specific vehicle. Its reach ends there.
- A blanket lien covers substantially everything: “all assets, now owned or hereafter acquired,” typically including receivables, inventory, equipment, and general intangibles.
The distinction decides whether you can finance anything else. A blanket lien from a prior lender can make an otherwise strong business unfinanceable until it is subordinated, released, or carved out, because the new lender has nothing left to secure.
Why does filing order matter?
Priority is generally determined by who filed first. The first-filed secured party has first claim on the collateral in a default; later filers stand behind them.
This is why a new lender will insist on either a first position, a formal subordination from the incumbent, or a carve-out excluding their collateral from an existing blanket lien. It is also why stale filings from paid-off loans cause real problems, the debt is gone, but the public notice still sits ahead of everyone else in line.
How do you run a UCC search?
Search the secretary of state’s database in the state where your business is organised, the state of incorporation or formation, not necessarily where you operate. Most states offer free public search; some charge a small fee for certified results.
Search your exact legal entity name, and then search variations: former names, DBAs, predecessor entities, and any affiliates that might have been named as debtor. Filings index on the debtor name, and a small spelling difference will hide a record.
Run this before you approach a lender. Finding a forgotten filing yourself, weeks ahead, is a minor cleanup task. Having a lender find it mid-diligence is a delay, and sometimes a decline, one of the mundane reasons files stall, alongside the causes in business loan declined.
What will a lender see?
Every active filing against your entity, including:
- Who filed, the secured party, though this is sometimes a representative or servicer rather than the actual funder.
- When, establishing priority.
- What collateral is claimed, specific or blanket.
- Amendments, continuations, and terminations.
A lender reads this as a map of your existing obligations and, critically, of what collateral is still available to secure new credit. It is also how short-term advances become visible even when they don’t appear cleanly as debt on your balance sheet, a point covered in revenue-based financing.
How long does a filing last?
A UCC-1 is generally effective for five years from filing. The secured party can file a continuation within the six months before expiry to extend it for another five years. If nobody continues it, the filing lapses on its own.
That five-year clock is why old filings linger: a loan repaid in year two leaves a filing that sits there until year five unless someone terminates it.
How do you clear an old filing?
When a loan is repaid, the secured party should file a UCC-3 termination statement. Many do so promptly. Many do not, particularly smaller funders and any lender that has since been acquired or wound down.
The practical sequence:
- Run the search and list every active filing.
- Match each to a real obligation. Anything you don’t recognise needs investigating immediately, it may be an error, a duplicate, or a filing by a broker rather than the actual funder.
- For repaid loans, request a termination in writing from the secured party, along with a payoff letter if you don’t have one.
- Verify the termination was actually filed. Do not take “we’ll take care of it” as confirmation, re-run the search.
Start this early. Chasing a termination from a lender that no longer exists takes time you won’t have inside a live transaction.
Why this matters for your borrowing base
Collateral subject to another party’s lien is generally ineligible. That means an unterminated filing doesn’t just complicate the paperwork, it removes assets from the pool your availability is calculated from, exactly as described in the borrowing base certificate. The same logic applies in factoring, where a factor and any other secured party must sort out their positions before funding flows: see recourse vs non-recourse factoring.
The practical read
Run a UCC search on your own business today. It costs little or nothing and takes minutes. You are looking for three things: filings you don’t recognise, blanket liens securing debt you have already repaid, and anything filed by a party you cannot identify.
Every one of those is far cheaper to resolve on a quiet Tuesday than during diligence with a closing date approaching.
Run your own file first
Not sure what your lien position looks like, or what it does to your borrowing capacity? Run the assessment or send us what you find and we’ll tell you how a credit team would read it.
Educational only. Nothing here is an offer of credit, a commitment to lend, or legal advice. UCC rules, filing offices, search procedures and fees vary by state, consult your own counsel on any specific filing.