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UCC Lien Release Following Merchant Cash Advance Repayment: FAQs

Getting a merchant cash advance can be a great way for small businesses to access quick capital. However, many business owners don’t fully understand the process of getting a UCC lien release once the advance has been repaid. This article will walk through some frequently asked questions about UCC lien releases to help demystify the process.

What is a UCC lien?

When you take out a merchant cash advance (MCA), the funder puts a UCC-1 financing statement on your business. This gives them a blanket lien on your business assets as collateral for the advance. The UCC lien means if you default, the funder has a right to seize your business assets to repay what they are owed.

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Why do I need a UCC lien release?

You need a UCC lien release to clear the funder’s claim on your business assets. As long as the lien is active, you don’t have clear title to your assets. This could cause issues if you want to take out a future loan or sell the business. So getting a release is an important last step after paying back the advance.

How do I get a UCC lien release?

The process for getting a lien release will depend on your agreement with the funder:.

• Most agreements state the funder will file a UCC-3 termination statement within a certain days after the advance has been repaid in full. This automatically releases the lien.
• If your agreement doesn’t specify, you’ll need to request the release in writing once the balance hits zero. Send a certified letter requesting they file the UCC-3.
• In rare cases, you may need to file the UCC-3 yourself if the funder drags their feet. But talk to them first because self-filing can get complicated.

What if my agreement doesn’t mention a UCC lien release?

Even if your MCA agreement is silent on releasing liens, the funder is still legally required to file a termination statement in a timely manner once you satisfy the debt. If they don’t, you can take legal action to compel them to release the lien.

Before going the legal route, try sending a formal request first. That often motivates uncooperative funders to take action. But if you hit resistance, don’t hesitate to get your attorney involved.

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How long should it take to get my UCC lien release?

Most MCA agreements require the funder to send a lien release within 30-90 days after the balance reaches zero. If it’s taking much longer than that with no explanation, something may be amiss.

Delays can happen – clerical errors, lost paperwork, etc. Follow up persistently with the funder to rectify issues. If you hit a wall, consult an attorney about forcing the release through legal channels.

I fully repaid but the funder went out of business – now what?

It’s an unfortunate scenario if your MCA provider shuts down before releasing the lien. But all is not lost. Here are some options to explore:

• Contact the firm handling the wind-down of the funder’s assets. They may still have the capacity to file the UCC-3.
• Research whether the funder sold off their MCA portfolio before dissolving. If so, the buyer should be able to release the lien.
• As a last resort, consult an attorney about filing a self-release. This terminates the lien but can get legally complicated.

The key is acting fast after the funder folds, before records disappear. So move quickly to track down who controls the lien paperwork and get it cleared.

What if I only partially repaid the advance before paying it off?

If you paid back part of an MCA but ended up refinancing the remainder with another company, things get messy. The original funder still has an active UCC lien even though you no longer owe them money.

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In this case, you need to get a partial release on the portion of the advance you repaid before refinancing the balance. This clears their lien on those repaid funds. Then work out lien release logistics with the new creditor for the remaining amount.

Can a UCC lien hurt my credit score?

No, UCC liens don’t directly impact your personal or business credit reports and scores. That’s because they aren’t actually loans – UCCs are commercial security instruments that give creditors a claim on assets.

That said, not getting UCC releases cleared off can indirectly hurt you later. For example, by making it harder to get approved for financing if assets are still encumbered by old liens.

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Can I get a new MCA with an existing UCC lien?

You can potentially get another advance with a UCC still on your business from the previous one. But approval odds go down significantly in this scenario.

Most alternative funders view unsatisfied UCC liens as too risky, regardless of your revenues and repayment ability. That’s why you should get existing liens cleared ASAP if pursuing new financing.

What legal recourse do I have if the funder won’t release the UCC lien?

If a funder unjustly drags their feet on sending a lien release, you can take legal action to force their hand. Typical options include:

• Filing suit for an injunction ordering them to terminate the UCC.
• Reporting them to the state attorney general for unfair business practices.
• Submitting complaints with regulators like the FTC or Consumer Financial Protection Bureau.
• In extreme cases, suing for damages related to the failure to release the lien.

Before going the litigation route, make sure you’ve fully satisfied the debt and have written records of requesting the release. Consult an attorney to understand your options and probability of prevailing.

Should I just handle the UCC lien release process myself?

While you can technically file your own termination statement in some states, it’s usually best to let the funder handle discharging the lien. Self-filing incorrectly can create big legal headaches down the road.

Instead, use certified mail and legal demands to pressure the funder if they drag feet on releasing the UCC. Only self-file as an absolute last option under attorney guidance.