When you sign a Merchant Cash Advance agreement, you’re signing more than you think. Buried in the contract is authorization for the MCA funder to file a UCC-1 financing statement — a public lien on your business assets. Most business owners don’t notice it until they apply for a bank loan, an SBA program, or a second MCA, and suddenly they’re told their application is denied because there’s a lien on file.
This guide explains what a UCC lien is in plain language, why MCA companies use them, what impact they have on your business, and exactly how to get them released when the time comes.
What Is a UCC-1 Lien?
UCC stands for Uniform Commercial Code — a standardized set of laws that governs commercial transactions across the United States. A UCC-1 is a financing statement filed by a lender with the Secretary of State in your state (sometimes called a “fixture filing” if it covers specific equipment).
Filing a UCC-1 is how a lender publicly declares: “This business owes us money, and we have a security interest in their assets.” It’s the commercial lending equivalent of a lien on your house — except it applies to business property including accounts receivable, equipment, inventory, and sometimes the entire business.
UCC-1 filings are public record. Any lender, bank, or potential investor who searches your business will see them. This is by design — the filing system is meant to alert future creditors that your assets may already be spoken for.
Why MCA Companies File UCCs
MCA funders aren’t technically making loans — they’re purchasing a portion of your future revenue. That’s how they sidestep most lending regulations. But to protect their position, they file UCC liens that give them a security interest in that future revenue (and often all your other business assets too).
Three things the UCC filing does for them:
- Establishes priority. If multiple creditors have claims on your assets, the first UCC filed generally has the strongest claim. MCA funders file immediately after funding to lock in first position.
- Signals to other lenders. When another lender sees the UCC, they know your revenue is already pledged. Many will decline to lend to you or subordinate their position — which they’re reluctant to do.
- Creates legal enforcement mechanism. If you default, the UCC gives them a clear path to enforce their claims through the courts without having to prove the loan terms in full.
How MCA UCCs Differ from Traditional Liens
| Characteristic | Traditional Business Loan Lien | MCA UCC Lien |
|---|---|---|
| What it covers | Specific collateral (equipment, property) | Often “all assets” — accounts receivable, inventory, equipment, IP |
| How quickly it’s filed | At loan closing | Same day as funding — sometimes before the wire hits |
| Duration | Tied to loan term | 5 years (auto-renewable unless you terminate it) |
| Impact on future borrowing | Moderate — banks work around specific collateral | Severe — blanket lien on all assets blocks most lenders |
| Termination process | Lender files UCC-3 termination after payoff | Requires explicit request — doesn’t happen automatically |
Paying off your MCA does NOT automatically remove the UCC lien. You must contact the funder and request a UCC-3 termination statement. Some funders file it promptly. Others sit on it for months or never do it without repeated follow-up. The lien stays on record — and blocks future funding — until that termination is filed.
What a UCC Lien Means for Your Business Day-to-Day
It limits your future funding options
This is the biggest practical impact. Banks, credit unions, and SBA lenders will check for UCC filings before approving any loan. A blanket MCA lien that covers all assets tells them there may be nothing left for them to secure against. Many will decline outright or require the MCA funder to subordinate their position — which most won’t do.
It doesn’t freeze your operations
A UCC lien is not a judgment. It doesn’t freeze your bank accounts, stop you from running your business, or prevent you from selling inventory or collecting receivables in the normal course of business. It only becomes actively problematic if you default and the funder tries to enforce it — or when you try to access new financing.
Stacked UCCs create compounding problems
Every MCA funder files their own UCC. If you’ve taken multiple advances, you may have three, four, or five separate UCC-1 filings on record — some in first position, some subordinated. Each one signals additional risk to future lenders and compounds the difficulty of getting conventional financing.
How to Find Out If You Have a UCC Lien
You can search for UCC filings yourself. Most states maintain a free public search portal through the Secretary of State’s website. Search under your legal business name and any DBA names. You’ll see every active UCC-1 filing, who filed it, when, and what assets it covers.
For a comprehensive view across multiple states (if your business operates in more than one), paid services like CT Corporation or CT Lien Solutions can pull a full national search in minutes.
How to Get a UCC Lien Released
- Pay off the MCA in full. No funder will release a lien on an active advance. Get your current payoff figure in writing — not the original purchased amount, the current remaining balance.
- Request the UCC-3 termination in writing. As soon as the final payment clears, email or call the funder’s servicing department and ask them to file a UCC-3 termination statement. Get this request confirmed in writing.
- Set a follow-up reminder for 10 business days. Check the Secretary of State filing system to confirm the UCC-3 was actually filed. If it hasn’t appeared, follow up again — and escalate if needed.
- If the funder won’t respond, file a UCC-3 yourself. Under the UCC, a debtor can file their own termination statement if the secured party fails to act after a formal written demand. You’ll need to show proof of payoff. This is uncommon but legally available to you.
- Keep proof of termination permanently. Once the lien is removed, save copies of the UCC-3 filing confirmation and your proof of payoff. Future lenders may ask for evidence that any prior liens were properly released.
Still carrying active MCAs with UCC liens on file?
There are structured paths out — refinancing, restructuring, and consolidation — that clear the liens as part of the payoff process.
See Your Exit Options →What If You’re Still Actively Repaying an MCA?
If your advance is still active, you have limited options for removing the lien — the funder won’t release it while you still owe them money. But you can manage the impact:
- Ask for a subordination agreement. If you need additional financing and a lender is willing to work with you, they may ask the MCA funder to subordinate their UCC position. This is more likely if you have a strong repayment history and the MCA balance is small relative to what you’re borrowing.
- Refinance the MCA. A proper MCA refinance pays off the advance entirely, triggers the UCC termination, and gives you a clean slate with a new lender — often at a lower cost than the original advance.
- Negotiate a payoff discount. Some funders will accept less than the full remaining balance in exchange for immediate payoff. This is settlement territory — and it works better when you’re approaching default than when you’re current — but it’s a real option for businesses that have deteriorated significantly.
Frequently Asked Questions
Can an MCA company put a UCC lien on my personal assets?
Standard MCA UCC filings are against the business entity, not you personally. However, if you signed a personal guarantee as part of your MCA agreement — which many funders require — the guarantee gives them recourse against you personally in a default scenario. That’s separate from the UCC filing itself. Read your agreement carefully for personal guarantee language.
Does having a UCC lien hurt my business credit score?
UCC filings don’t directly affect your business credit score the way a late payment would. But they are visible to lenders who run a commercial credit check, and they signal existing debt obligations that reduce your apparent creditworthiness. Multiple UCC filings from stacked MCAs are a particularly strong negative signal to underwriters.
What happens to the UCC lien if I close my business?
Closing the business doesn’t eliminate the lien. The MCA funder’s security interest continues against whatever business assets remain. If assets are sold during dissolution, the funder may have a claim on the proceeds. If you’re considering closing while still owing MCA funds, consult a business attorney before moving forward.
How long does a UCC lien stay on file if I do nothing?
UCC-1 filings are effective for 5 years from the date of filing. After 5 years, they lapse automatically unless the funder files a UCC-3 continuation statement. Many funders do file continuations — so don’t count on the lien expiring on its own while you still owe them money.
Can I get a bank loan while a UCC lien is active?
It’s difficult but not always impossible. Some community banks and SBA lenders will work with you if the MCA balance is small, the lender is willing to subordinate their UCC position, and your overall credit profile is strong. Most conventional lenders, however, will decline applications with blanket MCA UCC liens outstanding. Your best path to conventional financing is to pay off the MCA and get the lien terminated first.