What is a UCC repository and how to delete a UCC repository
Qualifying for business financing is often a delicate process. To increase your chances of approval, a lender must believe that lending money to your business is a smart financial move. In other words, your business must present an acceptable level of risk in the eyes of a lender.
How to achieve this level of solvency for your business? Having strong business credit scores and a credible, established business with healthy profits is a good start. You can also consult this Nav guide for more great advice.
Yet, even if you think your business has all of its financial and credit problems in a row, you should be aware of another potential hurdle that could hurt your chances of loan approval – the UCC filing.
How to remove a UCC privilege
Rules vary from state to state regarding the release of a UCC lien after a borrower has settled the debt. There are mainly two main ways to remove them. One way is to ask the lender to file an amendment to the UCC-3 financing statement. Another way to remove a UCC deposit is to take an oath of full payment to the Secretary of State.
What is a UCC deposit?
A UCC deposit, also known as a UCC lien or UCC-1, is a statement of financing that lenders can file against your business with your secretary of state. When you take out a secured loan, the lender may deposit a lien to protect the asset or assets that you have committed to obtain financing. It could be a piece of equipment, a vehicle, a property, or even a general lien naming all of your assets.
A UCC-1 protects a lender’s interest for five years (unless the lender re-files) and will generally be included in your business credit reports. (Remember, you can check your business credit reports and scores with Nav.)
Keep in mind that UCC filings are public documents. Therefore, even if a UCC lien does not appear on your business credit reports for some reason, it may still appear if you are applying for financing for a new business.
Why a UCC deposit might hurt you
UCC privileges are not unusual in the world of corporate finance, and unlike privileges on your personal credit, a UCC filing does not indicate that you have done anything wrong. Nonetheless, future lenders might be reluctant to approve additional credit applications until you have satisfied your existing privileges.
Why? Because an existing UCC-1 deposit can increase your business credit risk from a lending perspective. This means that you already owe money to another lender and your assets are already pledged with someone else.
This is an important consideration because the lender with the oldest UCC-1 deposit legally has the first claim on the assets. In the event of default, the lender who submitted the second UCC deposit would only be able to recover the funds from the sale of any collateral. after the first lender had the opportunity to do so.
Ways to delete a UCC repository
- Ask the lender to terminate the lien upon repayment.
- Visit your secretary of state’s office.
- Dispute inaccurate information on your business credit reports.
Want to improve your chances of getting financing for a new business? It is a good idea to make sure that your business does not have any outstanding UCC privileges before you complete any new business loan application.
In a perfect world, a lender would have to withdraw a UCC-1 every time you pay off the debt associated with it. Unfortunately, it doesn’t always work that way. You could pay off a debt in full but find that the UCC-1 deposit remains in place afterwards.
You can check your business credit reports and your secretary of state’s website to look for UCC filings against your business. If you discover an outstanding UCC lien that is still in place after you settle a debt, here are some steps you can take to remove the UCC filing.
Ask the lender to terminate the lien upon repayment.
When paying off a loan, a good rule of thumb is to immediately submit a request to the lender to file a UCC-3 form with your secretary of state. The UCC-3 will terminate the lien on the asset (or assets) of your business and remove the UCC-1 repository.
Note: This may or may not trigger the removal of the UCC deposit from your business credit reports. Dun & Bradstreet, for example, will not delete a closed UCC file until it has received a request from a client or until the privilege has been inactive for 11 years, whichever occurs first. You should always check.
Visit your secretary of state’s office.
If your lender fails to file a UCC-3 form after paying off a debt, another option you may want to consider is to apply on your own. To do this, you will usually need to visit your Secretary of State’s office in person. Once there, you can swear under oath that you have fully paid the debt and wish to request the removal of the UCC-1 deposit.
Dispute inaccurate information on your business credit reports.
It’s a good idea to keep an eye on your top three credit reports and scores from Dun & Bradstreet, Experian, and Equifax. If you discover an outdated UCC filing on your credit reports that has already been posted, you can dispute the error and ask the business credit reporting agencies to remove it from your reports.
Nav makes it easy to dispute errors on your D&B and Experian reports directly through your free Nav account. You can also initiate disputes directly with trade credit bureaus here:
Do not wait the last minute
Changes to your business credit reports and your state’s public records take time. If you plan to apply for financing for a new business soon, it is wise to make sure that you are well prepared in advance for the loan application.
Whatever you do, don’t wait until the last minute to try and fix an outdated UCC repository. This is a mistake that could cost you a loan approval.
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