A factoring company must rely on their UCC financing statement submitted to a state agency to secure their position on the accounts receivables they fund. It is essential for the invoice factoring company to have first position on the receivables. Given the current credit climate where bank institutions are failing and/or are being overtaken by other banks, it is important to know what UCC filings have been made against your company assets. There may be an old filing from a soon to be non existent bank for a small line of credit that long ago was paid off. Without formally requesting the “termination†of the filing, it may still show up on a filing search. Factoring companies will require these dead filings be cleared prior to any ongoing funding.
Normally when a company is looking for invoice factoring to help with cash flow, time is of the essence to get started. Having to go back and find contact info for an out of business bank or finance company can significantly hold up the process. The best measure to insure this does not happen is to contact your local state agency and request a UCC search on your company. Many states offer this online these days. If you find a dead financing statement, contact the institution and request a UCC-3 termination of their lien on your collateral. Make sure to keep a copy for your records.