Why Banks Check UCC Filings
Every traditional lender runs a UCC search during underwriting. UCC filings reveal who has a secured interest in your business assets. If an MCA funder has filed a blanket UCC lien, the bank sees another creditor already claims the assets the bank would need as collateral. The result is almost always denial.
How UCC Liens Block Financing
Banks need collateral priority. If they lend and you default, they want first claim on assets. A pre-existing MCA UCC lien puts them in a subordinate position where the MCA funder gets paid first. No bank accepts that. Multiple UCC liens are worse, signaling financial distress and poor creditworthiness. Even a single MCA UCC lien can prevent you from obtaining SBA loans, business lines of credit, equipment financing, commercial real estate loans, and invoice factoring facilities.
Clearing the Path to Traditional Financing
To regain access to traditional lending:
- Settle or pay off all MCA obligations.
- Obtain UCC-3 termination statements from each funder.
- Verify terminations in Secretary of State records.
- Allow time for business credit reports to update.
- Apply for traditional financing with a clean UCC search.
Interim Financing Options
While resolving liens, some financing may still be available. Revenue-based financing not requiring clean UCC searches, though at higher cost. Some lenders specialize in subordinate positions at premium rates. Equipment financing secured by specific equipment rather than general assets may work if the MCA lien covers only receivables.
Working with Your Attorney
Your MCA attorney should understand your ultimate goal is restoring access to traditional financing, not just resolving debt. Settlement agreements must include provisions requiring prompt UCC termination. The attorney should coordinate with your accountant and potential lender to ensure the re-qualification path is clear.