In the funding world, UCC financing statements are essential in doing business. They are a vital piece to the puzzle and can cause major problems if filed incorrectly. When it comes to perfecting a financing statement, there are many items to consider and it’s important to know where to start.
First off, perform your due diligence. It’s imperative to research any existing UCC’s and search results can present a wealth of information. When reviewing the results, a few questions you may want to ask include: who are the secured parties, who has priority position, what is the collateral, are they still funding, will they terminate, and will they subordinate? Performing your due diligence and addressing the secured parties early on can prevent unpleasant surprises down the road.
Now that you’ve done your research and have cleared the secured party list, it’s time to submit your UCC. The first part of this step is to know what your company’s policies are and always consult an attorney prior to filing. Once you are sure of the requirements, you can then perfect your UCC. The key word here is “perfect”, which means correctly filing the financing statement. An unperfected UCC is as good as not filing at all (gasp!). Knowing the proper way to secure financing statements is the biggest hurdle to overcome and thankfully there are many resources available to guide us through the process; with various tutorials, webinars, filing services and state websites, learning the correct way to secure your position is as easy as 1-2-3.
The last piece is to perform an “after filing search”. You never want to fund until you confirm your UCC is in place. This search should show your UCC and any others that may have snuck in. You want to ensure your position isn’t compromised, so any new UCC’s should be addressed accordingly.
When a funding relationship comes to a close, you may be requested to terminate your secured filing. This process is easy, however for your funded and documented clients, you’ll want to obtain contractual general releases prior to terminating your UCC. Again, always consult with an attorney and know what your company’s policies are prior to releasing.
While it seems the steps above are rather simple, they play a major role in the funding industry. It is extremely important, and highly recommended, to obtain proper education on financing statements. Learning the right way will save you time, energy and stress in the long run.
Senior Credit Analyst