What Is a UCC Filing? How UCC-1 Liens Work in Factoring
A UCC filing tells other lenders that your receivables are financed. Learn what the UCC-1 covers, how lien priority works and how a UCC-3 ends the filing.
- ✓Public record. The UCC-1 sits with your state's Secretary of State filing office.
- ✓Receivables focus. On a factoring account, the filing covers the invoices you sell.
- ✓Clear exit. A UCC-3 termination ends the filing once your account is paid out.
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Message a SpecialistExecutive Summary: UCC Filings
What it is: A UCC filing is a UCC-1 financing statement placed on public record with a state Secretary of State, giving notice that a secured party holds an interest in a business's assets, such as its receivables.
The numbers: On a factoring account, the UCC-1 goes on record during the 2–5 day closing that follows same-day approval. You then receive 70%–90% of each approved invoice, the factoring fee runs 1%–3%, and monthly volume starts around $50,000 (estimated).
Key constraints: An existing blanket lien from a bank or MCA can block a new filing until the earlier creditor signs a subordination or intercreditor agreement. A UCC lien search shows those filings before closing.
The Fast Facts on UCC Filings
What is a UCC-1 financing statement?
A UCC-1 financing statement is defined as a public filing with a state's Secretary of State that gives notice of a secured party's interest in a debtor's assets. In factoring, the filing covers the receivables you sell and tells later lenders those invoices are already financed.
Does a UCC filing hurt my business credit?
The short answer is that a UCC filing is a public notice of a financed asset, and it is not a late payment or a default. Other lenders will see it in a lien search and will ask how much of your collateral is already pledged before they extend credit.
How long does a UCC-1 stay on record?
The short answer is that a UCC-1 stays on record five years from the filing date. The secured party can extend it with a UCC-3 continuation in the six months before it lapses, and UCC 9-513 requires a termination statement once the obligation is satisfied and you demand one.
How a UCC filing works in factoring
The factoring process puts the filing inside closing, before your first advance.
Uniform Commercial Code
The Uniform Commercial Code is a set of model laws adopted by every US state. It governs sales of goods, sales of receivables and secured lending.
UCC article 9
Article 9 governs security interests in personal property and also covers outright sales of accounts. A receivables purchase is perfected with the same UCC-1 a lender uses.
The UCC-1 at closing
The lending partner files the UCC-1 with your state during the 2–5 day closing. It names your business as debtor and describes the receivables it covers.
UCC-3 amendments and termination
| Filing | What it does | When you see it |
|---|---|---|
| UCC-1 financing statement | Gives public notice of a secured party's interest | At closing on a new account |
| UCC-3 amendment | Changes collateral, names or addresses on the UCC-1 | When your business details or account terms change |
| UCC-3 continuation | Extends the filing another five years | In the six months before the five-year lapse |
| UCC-3 assignment | Moves the filing to a new secured party | During a factoring buyout |
| UCC-3 termination | Ends the filing on public record | After payoff, on your demand under UCC 9-513 |
Lien priority, searches and creditor agreements
UCC lien search
A UCC lien search checks a state's filing records for existing financing statements against your business. Run one before you apply so a prior blanket lien does not surprise you at closing.
Subordination agreement
A subordination agreement is a creditor's written consent to rank behind another creditor on named assets. Your bank can sign one so your receivables can be factored.
Intercreditor agreement
An intercreditor agreement sets which lender has priority over which assets when two lenders finance one business. See how that split works under asset-based lending.
Factoring UCC-1 vs. bank blanket lien vs. federal tax lien
| Feature | Factoring UCC-1 | Bank Blanket Lien | Federal Tax Lien |
|---|---|---|---|
| Who files it | The secured party, with your state | The bank, with your state | The IRS, as a Notice of Federal Tax Lien |
| Assets covered | Receivables you sell | Usually all business assets | All property and rights to property |
| Typical duration | Five years, renewable by UCC-3 | Life of the loan | Until paid or unenforceable |
| How it ends | UCC-3 termination after payoff | UCC-3 termination after payoff | IRS release or withdrawal |
| Can it be subordinated? | Yes, by agreement | Yes, by subordination agreement | Yes, by IRS certificate of subordination |
Funding scenarios for UCC filings
Bank lien subordinated on receivables
- Funding Amount
- $102,000
- Industry
- Industrial supply distribution
- Customer Type
- Distributor selling to manufacturers
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-45
- Advance Rate
- 85%
A UCC lien search showed the owner's bank held a blanket lien on all assets, which blocked a new filing on receivables.
The SolutionThe bank signed a subordination agreement covering receivables only, and the UCC-1 went on record during the 2–5 day closing.
ResultThe owner received $102,000 on $120,000 of invoices, and the bank kept first position on equipment.
Factoring buyout with a UCC-3
- Funding Amount
- $64,000
- Industry
- Commercial printing
- Customer Type
- Printer billing retail chains
- Funding Type
- Factoring buyout
- Invoice Terms
- Net-60
- Advance Rate
- 80%
The owner wanted to leave a factor after the agreement ended, but its UCC-1 still covered the receivables.
The SolutionThe new account paid off the old factor, which sent a letter of release and filed a UCC-3 assignment.
ResultThe buyout closed in 4 days, and the owner received $64,000 on $80,000 of open invoices.
Termination filed after payoff
- Funding Amount
- $45,000
- Industry
- HVAC contracting
- Customer Type
- Mechanical subcontractor
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-30
- Advance Rate
- 90%
After a bank line came through, the owner paid off the factoring account, but the UCC-1 still showed in lien searches.
The SolutionThe owner sent a written demand under UCC 9-513, and the secured party filed a UCC-3 termination.
ResultThe last $50,000 invoice had advanced at 90% ($45,000); the termination posted within 20 days of the demand.
Who the UCC filings guide is for
Owners with an existing bank line
Your bank holds a blanket lien and you need a subordination agreement before you factor receivables.
Businesses switching factors
Your current factor's UCC-1 still covers your invoices and you need a buyout and a UCC-3.
Contractors and distributors on slow terms
Your customers pay on net-45 to net-60 and you want to know what the filing covers before you sign.
Where IFXI arranges invoice factoring
Texas, Florida, New York, Illinois, Georgia, Ohio, and Pennsylvania.
Frequently asked questions about UCC filings
Who files the UCC-1 on a factoring account?
The short answer is the lending partner, during the 2–5 day closing that follows same-day approval. The filing goes to the Secretary of State where your business is organized and covers the receivables you sell. You can confirm it yourself with a UCC lien search after closing.
Can I factor invoices if my bank already has a blanket lien?
Yes, you can, if the bank signs a subordination agreement or an intercreditor agreement that gives the factor first position on receivables. Banks often agree when factoring advances pay down the line. Without that consent, a second filing on the same receivables ranks behind the bank.
How do I get a UCC filing removed?
The short answer is to pay off the account and send the secured party a written demand for a UCC-3 termination. UCC 9-513 requires the secured party to file or send the termination within 20 days of that demand once the obligation is satisfied. Keep a copy of the filed termination.
Does a UCC filing mean I took out a loan?
The short answer is no: Article 9 covers sales of accounts, so a factor files the same UCC-1 a lender would. When you factor, you sell your invoices, and the filing records the buyer’s interest in them. Compare the two structures on factoring vs. a loan.
Sources
- UCC 9-513 (law.cornell.edu)
- Notice of Federal Tax Lien (law.cornell.edu)
General information about UCC filings. Rates, advance amounts and approval come from IFXI’s lending partner after its review and can change.
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