Some factoring companies choose to immediately file a Uniform Commercial Code (UCC-1) financing statement as soon as you contact them. There is only one reason to do this, it’s to make it difficult to go to another factoring company. Many times we see situations where a UCC-1 has been filed and we have to ask our new client to go back to another factor they only had discussions with, to get them to terminate their UCC. This totally unnecessary impediment usually adds time and expense to getting your factoring set up.
At Creative Capital Associates we normally wait until all the contracts have been signed and returned to us before filing a UCC-1. It is one of the last items we take care of right before the first funding. There are too many situations where given the best intentions the factoring relationship never closes. Beware of this activity because it is probably a harbinger of other difficulties to come.