A UCC-1 financing statement is a public filing that gives a creditor a security interest in a debtor's assets. MCA funders routinely file blanket UCC liens covering all business assets as part of the funding agreement.

Can I remove a UCC lien filed by an MCA funder?

Yes. If the lien was filed without authorization, is overbroad, or the underlying debt has been satisfied or is disputed, you can demand termination of the filing. If the funder refuses, you can pursue a court order compelling termination and potentially recover damages.

How does a UCC lien affect my business?

A UCC lien can prevent you from obtaining bank financing, business loans, or lines of credit. It signals to other creditors that your assets are encumbered and can make it difficult to enter into new business relationships that require credit checks.

UCC Liens Filed by MCA Funders: How to Challenge Them

MCA funders file UCC liens as leverage. These liens can block your ability to get bank financing, secure new contracts, or operate normally. But they can be challenged and removed.

Why MCA Funders File UCC Liens

As part of most MCA agreements, the funder requires a security interest in the business’s assets and files a UCC-1 financing statement to perfect that interest. These filings are typically blanket liens covering “all assets” of the business. The practical effect is to put the world on notice that the funder claims a security interest in everything the business owns.

The Impact on Your Business

A UCC lien on your business can prevent you from obtaining traditional bank financing because lenders will see the encumbrance during due diligence. It can interfere with vendor relationships, lease negotiations, and business sales. When multiple MCA funders file stacking liens, the cumulative effect can make the business appear insolvent to anyone who runs a lien search.

Grounds for Challenging UCC Liens

UCC liens can be challenged when the filing was unauthorized, when it is overbroad relative to the actual security interest granted, when the underlying obligation has been satisfied, or when the MCA agreement itself is unenforceable. Under New York’s UCC Article 9, a secured party has an obligation to file a termination statement within 20 days of receiving a demand when the obligation has been satisfied. Failure to do so can result in statutory damages.

The Termination Process

The first step is a formal demand to the funder to terminate the filing. If the funder refuses or ignores the demand, litigation may be necessary to compel termination. Courts can order the filing terminated and award damages for the funder’s wrongful refusal to release the lien, including consequential damages if the lien caused the business to lose financing or business opportunities.

Need Help With This Issue?

If you are facing a situation related to mca / predatory lending defense, we can help you understand your options and build a defense strategy.

Schedule a Consultation