How to Negotiate the Removal of a UCC Lien After Merchant Cash Advance Repayment
You Paid Off the Debt, But the Lien is Still There?
Yo, so you took out a merchant cash advance to help grow your business – and now that debt is fully paid off. Congrats! But…that annoying UCC lien is still just hanging around, putting a strain on your books.What gives? Aren’t they supposed to remove that thing after you settle up?Well, unfortunately lenders don’t always automatically remove liens once the balance is paid. Crazy, right? It’s a hassle, but you basically have to go through some extra steps to get them to finally take it off.Don’t worry though, I’m going to break down exactly how to negotiate the removal of that pesky UCC lien. We’ll look at the laws around it, talk about your rights, and I’ll give you some tips on the best way to approach the negotiation.But first, let’s get on the same page about what we’re even dealing with here…
What is a Merchant Cash Advance?
A merchant cash advance (MCA) is a type of financing/loan that provides an upfront lump sum payment to a business. The business then pays it back with a percentage of their future credit/debit card sales or revenues.It’s not technically considered a loan, which is why MCA companies can get around certain lending laws and regulations. No strict underwriting process, no APR limits, etc.The big appeal is that funding is relatively easy to get approved for – even for higher-risk businesses. But the tradeoff is that MCAs tend to be much more expensive than traditional loans in the long run.To secure the advance, MCA providers typically require a personal guarantee and a UCC lien filing from the business owner.
What’s a UCC Lien?
A UCC (Uniform Commercial Code) lien is a legal claim the lender has on your business assets. It gets publicly filed, showing that the lender has a secured interest in your assets until the debt is fully repaid.So if you default on the merchant cash advance, the lender can try to seize and sell off those assets to recoup their money.The lien attaches to all your business assets – equipment, inventory, accounts receivable, you name it. It can make it very difficult to get additional financing, sell assets, or even sell/transfer ownership of the business while that lien is active.Even after the advance is paid off, that UCC lien filing stays public record until the lender proactively releases it. And getting them to do that? Not always a walk in the park…
Why Don’t Lenders Automatically Remove Liens?
You’d think after you paid all that money back, the MCA company would be happy and quickly remove the lien from your business. But nope, many of them are lazy about it or intentionally drag their feet.A few potential reasons why:
- Incompetence/disorganization on their part
- Hoping you’ll pay another fee to get it removed faster
- Wanting to keep leverage over you in case there are any disputes later
- Straight up predatory behavior trying to make your life difficult
Whatever the reason, leaving that lien lingering is a crappy business practice that can really mess up your future plans and financing options.At the end of the day, they have no legal grounds to keep it active once the debt is paid off. You have the right to get that lien removed, you just may have to put in some effort to make it happen.
Your Rights Around UCC Lien Removal
While MCA companies don’t have to automatically remove liens, there are laws in place that protect your rights as the borrower:
- Under the UCC code, lenders are legally required to file a UCC-3 termination statement within 20-30 days after the debt is satisfied, terminating their security interest.
- If they fail to do so, you can demand they terminate the lien. If they still refuse, you can take them to court to force the termination and potentially get compensation.
- Some states like California have even stricter “commercial loan lien release” laws with shorter deadlines for lenders to remove liens.
The key is having proof that you’ve fully repaid the advance amount according to the contract terms. Things like cleared checks, bank statements, or a lien release letter from the lender can serve as evidence.From there, you have legal recourse to get that lien terminated if the MCA company keeps giving you the runaround. More on exactly how to negotiate that in a bit.But first, why does getting the lien removed even matter that much? Let’s talk about the impacts…
Why It’s Important to Remove the Lien ASAP
Having an active UCC lien on your business can create all kinds of issues, like:
- Trouble Getting New Financing – Other lenders will see the lien and may deny you loans/credit because of it. Hurts your ability to grow.
- Can’t Sell Assets – You technically don’t have a free and clear ownership claim on equipment, inventory, etc. while the lien is attached.
- Difficulty Selling/Transferring the Business – The lien makes the sale much more complicated. Could be a dealbreaker for buyers.
- Personal Credit Issues – Some UCC liens also get reported on your personal credit, tanking your scores.
- Constant Nagging/Harassment – Lenders may keep bugging you about the lien as leverage to try selling you new products/services.
The sooner you can get rid of that lingering lien, the better. It’s just hanging over your business like a dark cloud of financial constraints.Now, let’s get into how to actually negotiate the lien termination…
Steps to Negotiate UCC Lien Removal
Alright, so you’ve paid off the merchant cash advance debt in full. Nice work! But the lender is being shady and hasn’t removed the UCC lien from your business like they’re supposed to.Here’s a step-by-step guide on how to (politely) raise some hell and get that lien terminated:
1) Gather Proof of Repayment
First thing’s first – get your ducks in a row with clear documentation proving you’ve satisfied the full debt according to the contract terms. Things like:
- Cleared checks/bank statements showing the advance was paid back
- Lien release authorization letter from the lender (if you have it)
- Final payoff statement showing $0 balance
- Copy of the original MCA agreement
Having this paper trail will be your leverage in the negotiation. Don’t skip this step!
2) Send a Lien Termination Request Letter
With your proof ready, send the lender a formal written notice requesting the termination of the UCC lien filing. Something like:“To Whom It May Concern,I am formally requesting that [LENDER NAME] file a UCC-3 termination statement to remove the lien on [YOUR BUSINESS NAME AND ADDRESS] pursuant to [LIEN ID/FILE NUMBER]. The merchant cash advance debt of [AMOUNT] has been satisfied in full as of [DATE] per the attached documentation.Please process this lien termination within 20 days as required by the Uniform Commercial Code. Failure to do so will result in further legal action.Thank you for your prompt attention to this matter.”Send it certified mail so you have proof they received it. And be sure to include copies of your payoff documentation.
3) Follow Up Persistently
The squeaky wheel gets the grease, as they say. Don’t just send one letter and hope for the best.If you don’t hear back or get any action within 20-30 days, follow up again firmly but professionally:
- Send another letter
- Call the lender
- Email every contact you can find
- Blow up their social media accounts if needed
The key is being an annoyingly persistent pest until they take action. Polite but relentless. Get ready to hound them daily if that’s what it takes.
4) Understand Your Legal Remedies
If the lender still refuses to cooperate after multiple requests, it’s time to play hardball with legal threats. Remind them that:
- Failing to terminate the lien violates the UCC code and other state laws
- You can take them to court to force a termination
- They may be on the hook for damages like legal fees, court costs, lost business opportunities, etc.
At this point, you may want to consult with a lawyer who can draft a more heavy-handed “demand letter” reiterating the violations and potential consequences.The goal is to make it obvious that keeping the lien active isn’t worth the legal headache for them. You aren’t afraid to take it to the next level.
5) File a Petition to Terminate the Lien
If the lender still gives you the runaround after all that, your last recourse is filing a petition with the courts to legally terminate the lien.The process and fees vary by state, but essentially you’ll submit documentation proving the debt was paid and ask a judge to order the lender to remove the lien.Having a lawyer represent you is recommended, as they can ensure you file everything properly and make a strong case for termination + potential damages.It’s a hassle and expense you’d rather avoid. But sometimes you gotta take the gloves off and fight for your rights when the lender is being shady.
6) Explore Other Remedies
While a court order terminating the lien is the main goal, you may also be able to pursue other legal remedies depending on your situation:
- Sue for any damages caused by the improper lien (lost business opportunities, credit issues, etc.)
- Report the lender to the FTC, CFPB, and state regulators for unfair business practices
- File complaints with the Better Business Bureau and on review sites
- For egregious cases, there may be grounds for RICO charges related to racketeering
The point is, don’t just take the lender’s crap lying down. You have rights as a borrower, and there are escalating steps you can take to fight back if needed.No one should have to deal with a shady lender improperly keeping liens active after you’ve paid what you owe fair and square.
Tips for Smoother Lien Negotiations
Dealing with lien terminations is often an uphill battle. But there are a few things you can do to try making the process a bit smoother:
- Understand the Contract Terms – Review what the MCA agreement actually says about lien removals, timelines, borrower rights, etc. Don’t let the lender misrepresent it.
- Stay Organized – Keep meticulous records of all communications, requests, notices, etc. Paper trails are crucial if you have to take legal action.
- Be Persistent But Professional – Don’t let the lender ignore you, but also don’t lose your cool. Kill them with polite annoyance.
- Hire a Lawyer If Needed – For particularly stubborn lenders, it may be worth hiring legal representation to apply more pressure.
- Leverage Your Leverage – Things like leaving public complaints, getting regulators involved, etc. can motivate lenders to cooperate.
- Offer to Pay a Reasonable Fee – As a last resort, some borrowers just pay a $100-300 lien termination fee to expedite it. But don’t get gouged!
The main thing? Don’t just accept the lender keeping that UCC lien active after you’ve paid up. You have rights, and there are ways to enforce them if needed.
When to Hire Professional Help
For most UCC lien removals, you can likely handle the negotiation process yourself if you stay organized and persistent. But there are cases where it may be wise to hire some professional legal help:
- The lender is being extremely uncooperative and you’ve hit a wall
- You need to escalate to filing a court petition to terminate the lien
- You’ve suffered significant damages you want to recoup from the lender
- The situation involves complex legal issues beyond just the lien release
A lawyer experienced in UCC laws and lender litigation can take over and apply more leverage through formal demand letters, court filings, and negotiation tactics.It’ll cost you some money upfront. But it may be worth it to finally get that lien removed without more headaches and wasted time.There are also lien release services that can attempt to negotiate the termination for a flat fee. Not as powerful as a real lawyer, but cheaper and better than going it alone.Just be wary of any services charging excessive fees or making grandiose promises. Do your research to avoid lien removal scams.