UCC Liens on Business Assets in New York: What Business Owners and Creditors Must Know

The lien may already be on file.

Many business owners do not realize that when they signed a Merchant Cash Advance agreement, the funder may have filed a UCC-1 financing statement against the business that same day. That filing can cover inventory, equipment, receivables, contract rights, and other business assets, including assets the company acquires later.

A UCC lien on business assets in New York is a secured creditor’s public claim against a debtor’s personal property. It is governed by Article 9 of the Uniform Commercial Code. For business owners with MCA agreements, the question is not only whether a lien exists, but also whether it is enforceable. The real questions are what it covers, whether it was filed correctly, and what options are available before a default turns into a collection action.

What Is a UCC-1 Blanket Lien in an MCA Agreement?

A UCC-1 blanket lien is a financing statement that gives public notice of a creditor’s claimed security interest in business assets.

In MCA agreements, funders often file broad UCC-1 statements covering nearly all business assets, including present and future receivables. The filing is intended to put other lenders on notice that the MCA funder will have priority if the business defaults.

A UCC-1 filing does not mean the funder owns your business property. It does not automatically give the funder the right to walk in and take inventory, equipment, or receivables. What it does create is a claimed security interest that may give the funder priority over other creditors.

That distinction matters. A lien is not the same thing as a judgment, and it is not always beyond challenge.

What Can an MCA Funder Actually Take Under a UCC Lien in New York?

A properly filed UCC lien may cover business personal property listed in the agreement and financing statement.

That may include:

• Inventory
• Equipment and machinery
• Accounts receivable
• Payment rights
• Contract rights
• General intangibles
• Certain deposit accounts
• Assets acquired after the filing date

But there are limits.

A UCC lien generally does not cover real estate. Land and buildings require separate mortgages or real property filings. A UCC lien also does not cover assets owned by another person or a separate legal entity.

The funder also cannot simply seize property the moment a payment is missed. Enforcement still requires the proper legal process. The UCC filing may establish a priority claim, but it does not eliminate the business owner’s rights or available defenses.

How Do You Find Out If a UCC Lien Has Been Filed Against Your Business?

UCC filings are public records. A business owner can search for active financing statements filed against the company through the New York Secretary of State.

When reviewing a UCC search, look closely at:

• The debtor's name
• The secured party name
• The filing date
• The collateral description
• Any continuation, amendment, assignment, or termination filings

Search every name your business has used. If your company changed its legal name, operates under a trade name, or has related entities, there may be filings under more than one name.

This search is especially important before signing new financing documents. An existing blanket lien can make it difficult to obtain conventional financing unless the lien is paid off, subordinated, terminated, or successfully challenged.

Are There Defects That Can Void or Weaken an MCA Funder’s UCC Lien?

Yes. A UCC filing is only as strong as its compliance with the rules.

Potential issues may include:

1. Incorrect debtor name.
   A financing statement must correctly identify the debtor. If the name is incorrect in a way that prevents the lien from appearing in a proper search, the lien may be vulnerable.
2. Lapsed filing.
   UCC filings generally remain effective for five years unless continued. If the creditor fails to file a timely continuation, the lien may lapse.
3. Wrong filing office.
   Most New York business UCC filings must be filed with the New York Secretary of State. Filing in the wrong place may undermine the creditor’s claimed priority.
4. Defective collateral description.
   If the collateral description is unclear or does not reasonably identify the assets claimed, the filing may be subject to challenge.

These issues do not automatically decide the case, but they can change the leverage in negotiations, litigation, and bankruptcy.

What Happens to the UCC Lien If You Default or File for Bankruptcy?

If the business defaults, the funder may try to enforce its rights under the agreement and the UCC filing. In MCA cases, funders often move quickly through lawsuits, confessions of judgment, bank restraints, and collection pressure.

The UCC lien may be used to support the funder’s claim against receivables or other business assets. But the lien itself still must be valid, properly perfected, and tied to an enforceable agreement.

Bankruptcy changes the analysis.

A properly perfected lien may survive bankruptcy as a secured claim. But bankruptcy can also create opportunities to challenge or limit the funder’s position. If the lien was filed incorrectly, lapsed, or perfected too close to the bankruptcy filing, it may be subject to review. In a Chapter 11 or Subchapter V case, the business may also be able to restructure secured claims based on the value of the collateral.

For businesses with multiple MCA obligations and overlapping blanket liens, bankruptcy may offer tools not available in ordinary settlement negotiations.

Common Mistakes New York Business Owners Make About UCC Liens

• Assuming the lien means the funder owns the assets.
  A UCC lien is a security interest. It is not a transfer of ownership.
• Assuming the lien was filed correctly.
  Debtor name errors, lapsed filings, and wrong filing locations can all matter.
• Assuming the lien disappears after payoff.
  A paid MCA does not always mean the UCC filing has been terminated. The business should request termination and confirm that it has been filed.
• Failing to run a UCC search before signing new financing documents.
  Existing blanket liens can block future financing or create priority disputes.
• Ignoring the collateral description.
  Not every UCC filing covers the same assets. The language matters.
• Waiting until collection starts.
  A lien review is often more useful before the funder begins enforcement.

Frequently Asked Questions

What does a UCC-1 blanket lien actually cover in a New York MCA agreement?

A UCC-1 blanket lien may cover a broad range of business assets, including inventory, equipment, receivables, payment rights, contract rights, and other personal property of the business. Many MCA agreements use broad language that covers assets the business owns now and those acquired later.

It generally does not cover real estate unless there is a separate real property filing. It also does not cover property owned by a third party or a separate legal entity.

How do I find out if an MCA funder has filed a UCC lien against my business?

You can search UCC filings through the New York Secretary of State. The search should be run under the business's exact legal name and any prior or alternate names it has used.

Once you locate a filing, review the filing date, secured party, debtor name, collateral description, and any later continuation or termination filings.

Can a UCC lien filed by an MCA company be challenged or voided in New York?

In some cases, yes. A UCC lien may be challenged if the filing contains serious debtor name errors, was filed in the wrong place, has lapsed, or contains a defective collateral description.

A lien may also become vulnerable if the underlying MCA agreement is successfully challenged. Each situation requires careful review of the agreement, the filing, and the funder’s conduct.

What happens to an MCA funder’s UCC lien if my business files for bankruptcy in New York?

A properly perfected lien may remain in place as a secured claim. However, bankruptcy may allow the business or trustee to challenge certain liens, especially if the lien was unperfected, lapsed, improperly filed, or filed shortly before the bankruptcy case.

In Chapter 11 or Subchapter V, the business may also be able to restructure the secured claim based on the value of the collateral.

If I paid off my MCA, why is the UCC lien still showing up on public records?

Because a payoff does not always automatically remove the filing.

The funder must file a UCC termination statement to clear the public record. If the MCA has been paid, the business should request termination in writing and then confirm the termination by conducting a follow-up search.

The Four Things to Know Before You Decide What to Do Next

If an MCA funder has filed a UCC lien against your business, start with four questions.

1. Was the lien properly filed?
   Review the debtor name, filing date, filing office, and continuation history.
2. What assets does the lien actually cover?
   The collateral description controls the scope of the claimed security interest.
3. Is the underlying MCA agreement enforceable?
   If the agreement functions more like a loan than a receivables purchase, there may be additional defenses to review.
4. Would bankruptcy or restructuring create a better outcome?
   For businesses with multiple MCA obligations, a broader restructuring strategy may provide more relief than a one-off settlement.

J. Singer Law Group helps businesses evaluate UCC filings, MCA agreements, collection actions, and restructuring options. The right approach depends on the lien, the agreement, the funder, and the business’s financial goals.

Get a second opinion before you sign another agreement or wait for enforcement to begin. Call (917) 905-8280.