What Is a UCC-1 Filing?
When you enter into a factoring agreement, the factoring company files a UCC-1 Financing Statement with your business’s secretary of state. This public legal notice informs all other creditors that the factor has a security interest in your company’s assets.
Specific Accounts Receivable Lien vs. Blanket Lien
It is crucial to understand the scope of the lien your factor registered:
- Accounts Receivable Lien: The ideal structure. The factoring company only holds a security interest in your freight invoices and proceeds from customer billings.
- Blanket Lien: A sweeping lien that encumbers ALL company assets, including your tractors, trailers, shop tools, bank accounts, and future personal property. Blanket liens can prevent you from securing equipment financing or business lines of credit.
The UCC-3 Termination Release Requirement
When you pay off your factoring obligations or transition to a new financing provider, the outgoing factor MUST file a UCC-3 Termination Statement. Without this release, no other factor or bank can step in to fund your invoices because your receivables remain legally encumbered.
What to Do If an Outgoing Factor Delays Your Release
Under the Uniform Commercial Code (UCC Section 9-513), a secured party is legally required to send a termination statement within 20 days of receiving a formal written payoff demand when no outstanding obligations exist. Having seasoned professionals like Trucker’s Choice manage your buyout coordination ensures your UCC-3 is filed promptly without disrupting cash flow.
Get Expert Help Navigating Factor Buyouts
Contact Trucker’s Choice at (480) 993-4100 for professional assistance in auditing your UCC filings and facilitating seamless transitions.