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How to Negotiate a Release of a UCC Lien in Merchant Cash Advance

What’s a UCC Lien Anyway?

So, you got a merchant cash advance and now there’s this thing called a UCC lien filed against your business. What the heck is that all about?
A UCC lien (which stands for Uniform Commercial Code lien) is basically a legal claim that the cash advance company has on your business assets. It allows them to take your stuff if you don’t pay back the advance.
Sounds kinda scary, right? But don’t freak out just yet. Getting a UCC lien removed is actually pretty common – and we’re gonna walk through exactly how to make that happen.

Why Cash Advance Companies Use UCC Liens

Merchant cash advance providers aren’t like regular banks or lenders. They can’t just take your house or garnish wages if you miss payments. So they use UCC liens as a way to secure the debt and protect themselves.
It’s kind of like when you finance a car – the lender puts a lien on the vehicle until you pay it off. Same basic idea with an MCA and a UCC lien on your business.
The cash advance company files the lien as public record. That way, if you try to sell assets or go out of business, they have first dibs on getting repaid from those assets.

Negotiating a UCC Lien Release

Okay, so now you know what a UCC lien is and why it exists. But you probably want to get rid of that thing ASAP, am I right?
The good news is, you absolutely can negotiate a release of that UCC lien once you’ve paid off the merchant cash advance. It just takes some paperwork and persistence.
Here are the basic steps:

1. Payoff the Advance in Full

First things first – you gotta pay that advance back 100%. UCC liens don’t just magically disappear when the term is up. Nope, you need to pay every last penny before they’ll even consider removing the lien.
This part is non-negotiable. The cash advance company isn’t gonna budge until you’ve settled up completely. So get that payoff amount and make sure it’s taken care of.

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2. Get Lien Release Documents

Once that advance is paid off, you need to formally request the lien release paperwork from the cash advance provider. Don’t just assume they’ll automatically remove it.
They should have some kind of standard release form for you to fill out. If not, you may need to draft up a quick lien release letter stating you’ve paid in full and are requesting removal of the UCC lien filing.

3. Follow Up Relentlessly

Here’s where the fun begins! You’ll probably have to bother the heck out of the cash advance company for a little while to actually get them to process that release.
These companies are notorious for dragging their feet on removing UCC liens, even after you’ve paid up. It’s a hassle, but you gotta stay on them with emails and phone calls until it’s officially released.

4. Record the Release

Once you finally get that lien release document, you’re not quite done yet. You need to take it over to wherever the original UCC lien was recorded and file it as a termination statement.
This makes the release an official public record, removing that lien once and for all from your business’s name. Phew, what a process!

Why You Can’t Ignore a UCC Lien

At this point, you might be thinking “Can’t I just ignore that UCC lien after paying it off? Does it really matter?”
Yes, it absolutely matters! Ignoring an old UCC lien can really mess up your business’s credit and financials down the road. Here’s a few reasons why:
Hurts Your Business Credit Score – Outstanding liens are a major red flag that tank your business credit rating. Lenders will see it and may deny future financing.
Blocks You from Getting Loans or Leases – Most banks and lenders won’t approve anything if there are open UCC liens on your business assets. It’s too much of a risk for them.
Prevents You from Selling Assets – Trying to sell equipment, inventory, or your whole business? Good luck with that UCC lien hanging around. It gives the lien holder first claim on anything you sell.
Creates a Legal Mess Down the Road – That lingering lien could potentially allow the cash advance company to make claims on your assets years later if it’s not properly terminated.
So in short, you can’t just ignore an old UCC lien once it’s been repaid. It’s got to be formally released and terminated, or it’ll keep causing you major headaches.

See also  How can I challenge the validity or enforceability of a UCC lien?

UCC Lien Removal Red Flags to Watch Out For

Unfortunately, some merchant cash advance providers are pretty shady when it comes to removing these UCC liens. There’s a lot of stalling, hidden fees, and flat-out refusals going on out there.
As you’re working through the lien release process, here are some common red flags to watch out for:

Excessive Delays and Runarounds

If the cash advance company keeps giving you the runaround with excuses like “it’s processing” or “the release is coming soon” for months on end – that’s a huge red flag something fishy is up.
A legitimate lien release shouldn’t take more than a few weeks once you’ve paid it off. Anything more than that and you’re probably being stalled on purpose.

Surprise “Processing” or “Release” Fees

Watch out for companies that try to tack on unexpected fees of $100 or more just to process and file the lien release paperwork. That’s a total scam!
There may be small filing fees from the county or state, which is normal. But cash advance companies shouldn’t be charging their own big fees on top of that.

Outright Refusal to Release the Lien

This is probably the biggest red flag of all – if the merchant cash advance provider simply refuses to release a paid-off UCC lien, even after you’ve followed all the right steps.
At that point, you may need to explore legal options to force that lien termination, like filing a petition in court. It’s a huge hassle, but sometimes it’s the only way.

Getting Help to Remove a Stubborn UCC Lien

Look, negotiating a UCC lien release is already a big enough pain when the cash advance company cooperates. But if they start pulling some of those shady tactics we just talked about, it can quickly turn into a nightmare!
At that point, you may want to consider hiring a professional to take over the process for you. There are companies and lawyers who specialize in dealing with these kinds of UCC lien issues.
For example, this Quora thread has some good suggestions on UCC lien removal services to look into.
It’ll cost you a fee, sure. But it may be worth it to have someone else handle the headache and make sure that lien gets terminated properly without any games being played.

See also  Can a consignor file a UCC lien against the consignee's inventory?

Avoiding UCC Lien Hassles in the First Place

Okay, so you know the whole process of getting a UCC lien removed after a merchant cash advance now. But you probably also want to avoid this mess altogether next time, right?
The easiest way is to simply steer clear of merchant cash advances and UCC lending if at all possible. I know, I know – those cash advances can be a lifeline when you need capital fast. But they also come with a ton of strings attached like personal guarantees and, you guessed it, UCC lien filings.
If you can swing it, you may want to look into some alternative financing options that don’t require blanket liens on all your business assets:
Lines of Credit – These give you access to cash when needed without crazy terms like MCAs. Though you’ll still likely have to secure it with some collateral.
Invoice Financing – This lets you borrow against your outstanding invoices without putting up all your assets as collateral.
Revenue-Based Financing – You get upfront cash in exchange for a percentage of future revenues, with no debt and no liens.
Online Lenders – They can provide short-term loans and lines of credit without all the UCC hassle, though rates are often high.
Those are just a few options to consider if you want to avoid the whole UCC lien rigamarole next time around. Because trust me – that process is not fun!

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