Published On: June 18, 2025 | Last Updated: June 18, 2025
Securing financing is often a critical step for business growth. Whether it’s for purchasing equipment, managing cash flow, or expanding operations, most lenders require some form of collateral to minimize their risk. One common way lenders secure their interest is through a UCC filing, a legal notice that publicly declares their claim on a borrower’s business assets.
While UCC filings are standard practice in commercial lending, many business owners are unaware of how these filings can impact future borrowing. A UCC filing creates a lien, which can tie up valuable assets and limit your ability to qualify for additional credit. According to the Small Business Administration (SBA), over 70% of small business loans are secured by some form of collateral, making UCC filings a common feature in business lending relationships.
Understanding what a UCC filing means and how liens work is essential for managing your financial flexibility and protecting access to future funding.
What Is a UCC Filing?
A UCC filing is a legal notice that lets the public know a lender has a claim on a borrower's business assets. The term UCC stands for Uniform Commercial Code, which is a set of rules that standardize how commercial transactions are handled across different states in the U.S.
When a business borrows money and uses its assets like equipment, inventory, or accounts receivable as collateral, the lender files a UCC-1 Financing Statement with the Secretary of State. This document shows who the borrower is, who the lender is, and what assets are being used to secure the loan.
This filing helps protect the lender’s interest by clarifying that certain assets are already tied to an existing loan. It also lets other lenders know that those assets cannot be used as collateral for another loan.
A UCC filing is a common part of business lending, offering security to lenders while allowing businesses to access needed capital.
What Does a Lien Mean for Your Business?
In business financing, a lien is a legal claim a lender places on a borrower's assets. It gives the lender the right to take possession of those assets if the borrower fails to repay the loan. When a UCC filing is made, it creates a lien on the specific collateral listed in the loan agreement.
This lien is not limited to just one type of asset. It can apply to equipment, inventory, accounts receivable, or other movable property owned by the business. For a middle market business that relies on asset-based lending, a lien can affect how freely those assets can be used in future transactions. As long as the debt remains unpaid, the lender holds a legal interest in it.
The lien protects the lender’s ability to recover its money if the business defaults. It also puts limitations on what the business can do with the collateral. For example, the business may not be able to sell or transfer the asset until the debt is cleared.
Understanding how liens work under a UCC filing is important when evaluating your business’s borrowing power and long-term financial flexibility.
Why Lenders Use UCC Filings?
Lenders use UCC filings to record their interest in a borrower's business assets formally. It is a legal step that protects their ability to recover the value of a loan if the borrower fails to repay. Instead of relying on informal agreements, the UCC filing creates a public record that clearly identifies which assets are pledged as collateral.
This filing also helps establish the lender’s priority when multiple creditors are involved. The lender who files first generally holds a stronger legal position in case of a default. Without this filing in place, a lender may not be able to claim the collateral if another creditor asserts a competing interest.
For lenders, it is not only about protecting repayment. It also reduces uncertainty and allows them to offer financing with more confidence. Many middle-market businesses rely on this form of secured credit to access funding, so understanding why and how lenders use UCC filings can help you avoid surprises and prepare for future borrowing needs.
What Is the Difference Between a Lien and a UCC Filing?
While both a lien and a UCC filing involve a lender’s legal interest in a borrower’s assets, they are not exactly the same. A lien is a broad term that refers to a creditor’s legal right to claim a specific asset if a debt is not repaid. It can apply to personal property, real estate, or business equipment. For example, a mortgage is a type of lien on a building until the home loan is paid off.
A UCC filing, on the other hand, is a specific type of lien used in commercial lending. It is based on the Uniform Commercial Code and is most often used when a lender wants to secure business assets like inventory, machinery, or accounts receivable. The lender files a UCC-1 form with the Secretary of State to make this interest public.
The main difference is scope and purpose. A lien can be placed on a single asset and is often used in personal or property-related transactions. A UCC filing is typically broader, covering a range of business assets, and is commonly used in business financing to secure commercial loans.
Understanding this difference is important for any business using its assets to access financing. It helps avoid conflicts between lenders and protects your ability to secure future funding.
How UCC Liens Can Block or Complicate Future Financing
UCC liens help protect lenders, but they can also create challenges for businesses seeking new financing. These filings stay on public record and signal that some or all of your business assets are already tied to another loan. This may raise concerns for future lenders and limit your access to credit.
Here are the key ways UCC liens can impact future borrowing:
- Assets Already Pledged as Collateral
Once a lender files a UCC lien, the listed assets become unavailable for securing additional loans. New lenders are unlikely to approve financing if they cannot claim the same assets. - Reduced Borrowing Flexibility
UCC liens narrow your financing options. You may need to find alternative assets to pledge or offer personal guarantees, which can be less favorable for your business. - Blanket Liens Limit Options
Some lenders file a blanket UCC lien covering all business assets. This restricts your ability to use any of your assets for other financing until the lien is released. - Lender Priority Becomes a Concern
UCC filings are time-stamped. If you default, the lender with the earliest valid filing gets first rights to the collateral. This can deter new lenders from getting involved. - Delays and Missed Opportunities
Active or outdated UCC liens can slow down the loan approval process or result in loan rejections, even if your credit profile and business performance are solid.
To maintain access to capital, regularly review and clear any UCC filings tied to paid-off loans. Keeping your records clean helps build trust with future lenders.
How to Check for Existing UCC Filings on Your Business
Knowing whether a UCC filing exists against your business is important, especially before applying for new financing. It helps you avoid surprises and ensures you can address any issues in advance. Here’s how you can check:
- Search the Secretary of State Website
Visit the official website of the Secretary of State in the state where your business is registered. Most states offer an online UCC search tool that allows you to look up filings using your business name or entity number. - Use Your Exact Legal Name
To get accurate results, search using your full legal business name as it appears on your official registration documents. UCC filings are tied directly to the business name, so any variation may affect your search. - Review the Filing Details Carefully
Once you locate a filing, review the creditor’s name, the filing date, and the assets listed as collateral. This information can help you determine if the filing is still active or should have been terminated. - Check Multiple States if Needed
If your business operates in more than one state or has borrowed from out-of-state lenders, it’s wise to check for filings in those additional states as well. - Request Termination for Old Filings
If you find a UCC lien that should have been removed (for example, because the loan has been paid off), contact the lender and request a termination statement. This ensures your records remain clean for future lenders.
Note: Regularly checking for UCC filings can help your business stay finance-ready and prevent delays when you need capital most.
Final Thoughts: Protecting Financing Flexibility
UCC filings are a common part of business loans, but they can make it harder to get new financing if not handled carefully. If your assets are tied up in a UCC lien, future lenders may hesitate to approve another loan. That’s why it’s important to check for active filings, close old ones, and understand what lenders have claimed as collateral.
If you're not sure how UCC filings may be affecting your business or you need help getting financing, EPOCH Financial is here to support you. We work with large businesses to offer funding solutions that keep things moving without unnecessary delays. Reach out to us if you want expert help to keep your business flexible and finance-ready.
