Watch out for unreleased UCC Liens; they can slow down your financing request.
Whatever your Business Credit financing request, when you borrow money to grow your business, whether as a loan or a line of credit, the lender will file a UCC lien against your business. That lien protects the lender’s interest in your business in the event of default.
After the loan is paid, the lender is required to file a release of that UCC lien. What businesses often discover, much later on, is that the Lender never cleared the lien. And, often as not, the business discovers this UCC lien lurking in the background only when they’ve applied for a new round of credit financing. The new lending process is held up until the old UCC lien is released by the previous lender.
Growth sneaks up on you and you find yourself in need of working capital. You need to apply for new financing and your lender gets you approved and they’re ready to close and they do a search and discover the unreleased UCC lien.
The worst part of this process, worse than slowing down access to your new round of working capital financing, is what you discover when you call the old Lender. We’ve seen it with clients at Aurora Consulting. The previous Lender says, “Oh, this happens all the time… You just have to call and let us know, and we’ll release it.”
Shocked? Yes, you should be. This should be part of the lending process as routine as any other, but it’s not.
You can protect your business’s future need for working capital by taking some simple steps. You can conduct active UCC lien searches on your business. Contact your local County Clerk’s office or Department of State website and conduct an search. You can create a relationship with a local title company, and probably for a very reasonable fee that title company can do a fast, thorough UCC search any time you need it.
Or, you can follow up with a Lender once you’ve satisfied a loan, or paid off and closed a line of credit. Request a written satisfaction notice from the Lender. Once you receive it, follow up with the Lender within thirty days to verify they’ve filed the release on their UCC Lien.
You’ve got better things to do with your business than worry about slowing down a future financing process. Taking some simple preventative measures today will help you promptly access working capital when your growing business needs it.