This can cause your company a severe headache. There are various lenders that use a third party vendor to file their UCC financial statements [see; What is the UCC?] This happens in order to mask the name of the actual lender thinking unscrupulous lenders are out there trolling UCC filings looking for companies who have borrowed. Lender A figures lender B will call the borrower and steal their clients.
There never used to be this problem, but now, thanks to the marketing of these third party vendors, hiding your UCC is in vogue. Many cash advance fintech lenders use them to hide their identity so their competitors don’t steal their clients. The problem is, both the cash advance companies and the third party filing companies are now going out of business every day.
In this scenario, you applied for a cash advance loan, the cash advance company made the loan, which you eventually paid off. A year later you approach a conventional lender for invoice factoring or a line of credit and the lender asks about a UCC filing placed on your business.
At this point the cash advance funder has closed up shop which means it’s impossible to contact them to ask for the termination of their UCC. And if you don’t have records of who the cash advance funder was and the ghost filing of the UCC is made by a vendor who is also out of business – you’re in for a major headache straightening that out with your local state agency that handles UCC’s.
Lesson: Anytime you have a relationship with any sort of lender; 1.) ask of they are going to file a UCC 2.) The day you have paid off the loan send the lender a request to Terminate the UCC. It is necessary for every company to keep track of UCC filings. Check your status regularly with your State Agency, you can do it online usually at www.yourstate.gov in the business section.
There are even lenders who file a UCC when you send in an application but you never went through with the loan. They think it is a way to “lock up your business.” Monitor your UCC status.