UCC filing (UCC-1)

Definition

The public notice a lender files to record its lien on a business's assets.

Why It Matters

Two of these matter to a buyer, in opposite directions. The ones already on file against the business are the seller's debts. They have to be paid off and released at closing, or the equipment you just bought still answers to somebody else. That is why payoff letters and lien releases belong in the funds flow, not in a promise for next week. The one your own lender files is what turns the loan documents into a claim on everything the business owns, so read what it covers before signing, not after. Somebody has to go looking for the first kind, and it is usually your closing attorney, not the lender. The lender's own check protects the lender and runs late. Order yours early, in every state the business has operated in and under every name it has traded as, because a filing sits under the name it was made against.

In numbers: A search of the public filings turns up a UCC-1 on all equipment from a $90k loan the seller paid off years ago and never terminated; clearing the stale filing before closing is cheaper than discovering it after.