Can You Sell a Business with Outstanding MCA Debt?
Yes, but the MCA debt complicates the sale significantly. The primary obstacle is the UCC lien. Every MCA funder files a UCC-1 against your business assets. A buyer performing due diligence will discover these liens, and no competent buyer will purchase a business with active UCC liens without resolution at or before closing.
How UCC Liens Affect the Sale
UCC liens encumber the assets a buyer is purchasing. The lien gives the funder a secured interest that follows the assets. If you sell without resolving the liens, the buyer inherits the encumbrance and the funder can enforce against the new owner’s use of those assets. No buyer will accept this.
Options for Selling
- Pay off from sale proceeds. Use a portion of the sale price to satisfy the remaining MCA balance at closing. The funder files a UCC-3 termination and remaining proceeds go to you.
- Negotiate settlement before listing. If the sale price will not cover the full balance, settle for a reduced amount first, then sell with clear title.
- Buyer assumes the debt. Rare and requires funder consent, but possible.
The Personal Guarantee Issue
Even if the MCA is paid off from sale proceeds, ensure the personal guarantee is explicitly released. A payoff without a guarantee release means the funder could pursue you for any deficiency. Get the release in writing before closing.
Planning the Sale
If you are considering selling with MCA debt, start early. Engage an MCA attorney to negotiate with funders, a broker who understands MCA encumbrances, and an accountant to model the financial impact on net proceeds. The goal is a clean closing with all liens terminated and all guarantees released.