UCC Liens from MCAs: What They Mean for Your Business

The lien was filed before the first withdrawal hit your account. You were never asked. You were never notified separately. It is already there, attached to everything the business owns or will own.

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When you signed the MCA agreement, a UCC-1 financing statement was filed with the Secretary of State. The filing creates a public record that says another party has a security interest in your business assets. It does not require a court order. It does not require your separate consent beyond the MCA signature itself. The signature on the MCA agreement was the consent. The filing was simultaneous or near-simultaneous with funding. By the time the advance hit your account, your business was already encumbered.

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The UCC-1 covers everything the agreement defines as collateral. In most MCA contracts, that definition is broad enough to function as a blanket. Future receivables. Present receivables. Bank accounts. Equipment. Inventory. Accounts. General intangibles. The language does not discriminate between asset classes. It sweeps across the entire business.

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What the Lien Actually Does

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A UCC lien does not mean the MCA company owns your assets. It means the MCA company has a priority claim on them. The distinction matters, but the practical effect is often the same. If another lender searches your business name in the UCC database — and every lender searches before funding — they see the lien. They see that someone else is already in line. They see risk they did not create and cannot control.

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This is why your next loan application was denied. Not because of your credit score. Not because of your revenue. Not because of your business plan. Because the UCC filing told the next lender that your receivables are already spoken for, your assets are already pledged, and any new lender would be subordinate to the existing claim. No lender wants to be second in line when the first creditor has a blanket lien.

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The denial compounds the original problem. The MCA created a cash flow strain. The UCC lien prevents you from obtaining the financing that could alleviate the strain. The business is locked into a single creditor relationship it did not choose and cannot easily exit.

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Priority and Stacking

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UCC liens operate on a first-to-file system. The first MCA company to file has first priority on the collateral. The second has second. The third has third. If you have stacked multiple MCAs, each funder filed a lien, and each is positioned in the order they filed. The last funder in line knows they are last. That is why their terms were the most aggressive — the factor rate was highest, the repayment period was shortest, and the daily withdrawal was largest. The funder priced the risk of being last in line into the cost of the advance, and you absorbed that cost.

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Stacking also means multiple UCC filings appear on your record simultaneously. To any outside observer searching the database, multiple filings signal a business under financial stress. The signal is accurate, but it also ensures the stress continues by preventing new financing on reasonable terms.

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The Lien Outlasts the Agreement

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A UCC-1 financing statement is effective for five years from the date of filing. If the MCA is repaid in six months, the lien remains for the balance of the five-year term unless the funder files a UCC-3 termination statement. Many funders do not file the termination. Some delay out of negligence. Some delay out of strategy — an active lien is leverage for future business. Some simply do not have an internal process for filing terminations promptly.

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The debt is paid. The lien persists. Your ability to obtain financing remains impaired by a public record reflecting an obligation that no longer exists. Every loan application, every credit check, every potential investor who searches the UCC database sees a lien that should not be there. The lien is a ghost of a transaction that ended months or years ago, and it haunts every subsequent financing attempt.

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What You Can Do

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If the MCA has been satisfied, you can demand that the funder file a UCC-3 termination. Under Article 9 of the Uniform Commercial Code, a secured party is required to file a termination statement within twenty days of receiving an authenticated demand from the debtor, provided the obligation has been fulfilled. The demand must be in writing. It must identify the financing statement by file number. It must state that the obligation has been satisfied.

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If the funder does not comply within twenty days, you have legal recourse. Some jurisdictions provide for statutory damages. All jurisdictions allow recovery of actual damages caused by the failure to terminate — the denied loan, the lost business opportunity, the higher interest rate you paid elsewhere because the lien made you a riskier borrower.

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If the MCA has not been satisfied, but the lien filing is broader than the agreement permits, or was filed without proper authorization under the agreement’s terms, an attorney can challenge the filing directly. The challenge may seek to narrow the scope of the lien, to remove it entirely on procedural grounds, or to contest the underlying agreement that the lien purports to secure.

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If the underlying agreement itself is unenforceable — because it constitutes a usurious loan, because it was induced by fraud, or because it violates state law — the lien securing that agreement is built on a void foundation. A lien that secures a void obligation has no legal basis to exist.

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The lien is a document. Documents can be contested, corrected, and removed. The question is whether the document reflects the actual agreement, whether the agreement itself is enforceable, and whether the funder has complied with its obligations under the UCC. An attorney who reviews the filing, the agreement, and the history of the transaction can answer all three questions and determine the most efficient path to getting the lien off your record.