UCC-1 Financing Statement

A UCC-Uniform Commercial Code-1 statement is a formal document that creditors file to formally announce their right to pursue personal property belonging to debtors who default on business loans they have extended. These notices, which are sometimes shortened as UCC-1, are usually published in local newspapers to inform the public of the creditors' intentions.

According to the Uniform Commercial Code (UCC), UCC-1s are required for all business loans. They establish a relative priority over which particular assets may be seized and in what order, as well as establishing the collection pecking order in situations where there are multiple lenders to the same debtor.

Types Of Ucc-1 Statements

Lenders can submit any of the next two UCC-1 statement types:

  1. **Specific collateral UCC-1 statements **- They are most frequently used in deals involving property or machinery. They grant lenders first-order secured rights to real estate or particular collateral, such as equipment bought with loaned money, as collateral..
  2. Blanket lien - As long as the conditions of these liens are specified in the collateral part of the UCC-1 statement, this grants the lender secured rights to a variety of assets. Lenders frequently favor broad or "all-asset" liens.

How A UCC Filing Affects Credit Scores?

Most businesses have a credit report and score, just like people do. Even though a UCC lien will show up on a company's credit record, it is unlikely that it will immediately lower the company's credit score unless the company were to default on the underlying loan.

Additionally, the debt linked to a UCC filing can increase a company's credit utilization ratio. If this ratio becomes too elevated, it may adversely impact the credit score. Furthermore, if a lien is placed on an asset, the business will be unable to use it as collateral for another loan.

Example Of A Ucc-1 Statement

Let's say that Alex's Excavation, a construction company, requests a business loan to buy two new hydraulic excavators. In order to formalize their interest in lending Alex money, Bank XYZ files a UCC-1. A short while later, Alex's Excavation loses two of its main building contracts, forcing the business to declare bankruptcy.

Bank XYZ would probably not be granted first-order rights to Alex's property and would have to wait until all other lenders were paid because the company had multiple lenders. Nonetheless, the bank promptly got the assets/cash stated in the UCC-1 declaration because it registered a specific collateral lien against the two excavators.

How Do You Remove A UCC Filing?

There are essentially two ways to discharge a UCC lien, albeit state regulations differ.

  1. The first is to submit a UCC-3 statement asking the lender to immediately release the lien upon loan repayment in full.
  2. The other choice is to go to your local secretary of state's office and declare under oath that you have satisfied the debt in full and request to have the UCC-1 removed if your lender fails to submit a UCC-3 after you have paid off the loan.

Conclusion

An official notice known as a UCC-Uniform Commercial Code-1 (UCC-1) statement is one that creditors file to officially establish their authority to seize assets from debtors who default on loans.

To publicly announce a lender's intention to seize collateralized assets, UCC-1 notices are frequently published in local newspapers.

The major purpose of these documents is to facilitate the collection process, frequently by assisting lenders in obtaining court orders allowing them to confiscate assets from defaulting borrowers.

These documents need to be sent to organizations based in the state where the borrower's company is incorporated.

UCC-1 statements can either be linked to a specific piece of collateral or be blanket liens.

  • Twitter
  • Facebook
  • LinkedIn
  • Instagram

Recommended Reading

The Rise of Subscription-Based Bookkeeping Services: Is It Right for Your Business?

Subscription-based bookkeeping services are transforming the way businesses manage their finances, offering predictable pricing, scalability, and automation-driven efficiency. Instead of paying hourly or hiring in-house staff, businesses can now access professional bookkeeping on a fixed monthly or annual subscription model. These services provide essential financial functions like transaction reconciliation, financial reporting, payroll processing, and tax compliance, often integrating with cloud-based accounting software for real-time insights. While this model is ideal for small to mid-sized businesses looking for cost-effective and flexible solutions, it may not suit companies with complex financial needs requiring personalized attention. Businesses considering a switch should evaluate service offerings, scalability, integration with accounting tools, and access to financial expertise to determine if subscription-based bookkeeping is the right fit for their long-term financial strategy.

Read more

Beyond Basic Bookkeeping: How CFO-Level Insights from Bookkeepers Improve Decision-Making

Modern bookkeeping services go beyond basic record-keeping, offering CFO-level insights that help businesses improve cash flow, optimize expenses, and make data-driven financial decisions. Strategic bookkeepers provide real-time financial intelligence, track key performance indicators (KPIs), and ensure businesses remain audit-ready and investor-friendly. By leveraging advanced bookkeeping services, businesses can enhance profitability, improve budgeting, and navigate tax compliance with greater confidence—all without hiring a full-time CFO.

Read more

Real-Time Bookkeeping: The Key to Smarter, Faster, and More Profitable Financial Management

Real-time bookkeeping revolutionizes financial management by providing businesses with instant access to up-to-date financial data, improving cash flow tracking, expense management, and profitability analysis. Unlike traditional bookkeeping, which relies on periodic updates, real-time bookkeeping ensures continuous transaction recording, automated reconciliation, and real-time financial reporting. This allows business owners to make faster, data-driven decisions, reduce errors, enhance tax compliance, and stay audit-ready. By leveraging cloud-based accounting tools and AI-driven automation, businesses can optimize financial strategy, scalability, and overall efficiency, making real-time bookkeeping an essential tool for growth and long-term success.

Read more