Updated on April 19th, 2023

What does filing a UCC mean?

A UCC filing is a form that creditors submit. When a company decides to take out a secured loan, the creditor is required to notify the public of its interest in the company’s assets.

Brad Nakase, Attorney

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What does filing a UCC mean?

The Uniform Commercial Code (UCC) is responsible for creating uniform regulations that are meant to be used by all states. The goal is for all states to be under the same laws – for there to be uniformity. Technically, states or jurisdictions do not have to adopt Uniform Codes. That said, most jurisdictions tend to adopt Unform Codes either wholly o

One of the UCC’s main goals is to unify, or streamline, the rules that apply to business and business contracts. One of the commercial matters that the UCC regulates is UCC filings. UCC Filings directly affect companies, specifically business loans.

When Charlene turned forty, she decided now was the time to follow her passion and fulfill her dream of starting her own stationery store. As an expert in scrapbooking and calligraphy, Charlene felt that she had something unique to offer her community. With her husband’s help, she built her store from the ground up, calling it “Feather and Nib.” However, Charlene decided to make her business a sole proprietorship, which meant that she could not attract investors. While friends offered her money to help with rent and purchasing materials from vendors, the money was not enough to keep the store afloat for long. Charlene knew she would have to get a loan. Though hesitant to do so, Charlene went to the bank to secure a loan for her business. There, Charlene agreed to a small loan, and with her creditor she agreed on a schedule for paying it back. Charlene agreed that if she did not pay back the loan in the time agreed, then she would forfeit the inventory of her store as collateral. After Charlene left the bank, the creditor created a UCC Filing. The filing established the terms of Charlene’s loan and the collateral. One year later, Charlene made good use of the loan and her business is booming. Now that she paid back every cent, the bank removed the UCC Filing from the loan, thereby completing the process.

A UCC filing is a form that creditors submit. When a company decides to take out a secured loan, the creditor is required to notify the public of its interest in the company’s assets. A secured loan is a loan that is backed by collateral. Collateral is financial assets that an individual owns, such as a car or home. These assets can be used as payment in the event the loan is not paid back. The creditor involved in the loan will file a financing statement, which is called a UCC-1 form. This form acknowledges the creditor’s security interest in the collateral.

So, let’s say a small business decides to take out a loan and wants to use its building as collateral. In this case, the creditor would file a UCC-1 financing statement to establish its security interest in the property. The UCC filing ensures that the creditor will be paid or compensated in the event the debtor defaults or goes bankrupt.

In the United States, all creditors use the same UCC-1 form to provide public notice of interests in assets. UCC-1 forms need to be filed in the Secretary of State’s office in the state where the debtor does business. What happens if the business has locations in multiple states? In this case, the UCC-1 form can be filed in more than one state.

Because UCC filings are public information, UCC-1 forms are available for public viewing. If certain parties are interested in a specific company’s debts or obligations, they can perform a UCC search. It is typical for creditors to perform a UCC filings search prior to making a secured loan. Why is this? The creditor wants to make sure that no other lenders have already filed a UCC-1 to establish their interest in the same collateral.

Example: Greg works at Bank A. As a creditor, he has been asked to complete a loan for a business called Cookies4You. The company has listed a factory as collateral. When Greg conducts a routine FCC filings search, he discovers that the company has already taken out a loan with another creditor, and the same factory is listed there as collateral. Cookies4You will need to use other collateral.

Can a UCC filing be removed?

Once a loan has been paid back, it is the responsibility of the borrower to ask the lender to remove the UCC filing. It is important to do this as soon as possible. Until the borrower does this, there will be public information available that suggests the lender has a claim on the borrower’s property. It is therefore best to have this canceled as quickly as possible, and not to tempt fate.

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