Trucking companies and owner-operators are often focused on providing safe and efficient load transportation for their clients. However, learning about the official documents that protect you when you enter a lease agreement is crucial as a business owner. Uniform Commercial Code (UCC) filings mitigate risks and protect assets, whether you lend or borrow money as a company.
Understanding UCC Filings
Every state has different laws that regulate commercial transactions like sales and leases. The Uniform Commercial Code is a set of standardized laws that provide stability and reliability to these transactions for companies that operate across state lines. UCC laws protect the legal rights of lenders and govern negotiable instruments like banknotes and checks, where the date of payment is stated.
UCC filings are often used for small-business loans and appear on a company’s credit report until the loan is paid. These official documents state a lender’s security interest on collateral. This means that the lender has the right to seize the assets that the borrower has pledged as collateral on a loan in case of default.
How Do UCC Filings Work?
UCC filings are an official notice that establishes a lien, which is a right to take possession of collateral assets or properties. This means that the lender has a first-position right to claim collateral as repayment if the borrower doesn’t pay the loan. UCC filings also help notify other creditors of the lender’s security interest in that collateral.
UCC liens are filed by submitting a UCC-1 financing statement to the Secretary of State’s office in the state where the borrower’s business is located.
Active filings are public records made accessible on the National Association of Secretaries of State webpage. These documents identify and list the assets or properties to which the lender has a claim.
UCC filing requirements include the legal names and addresses of both parties and a clear identification of collateral. There are two types of UCC filings:
- UCC lien on specific collateral
- UCC blanket lien that covers all of a business’s assets
Are UCC Filings Relevant for Your Trucking Business?
Yes. A UCC lien is an official notice that a lender has a security interest in one or all of your assets. This document is typically active for five years. UCC liens are renewed when the loan terms extend beyond that time, and are removed by the lender after you repay the loan.
You can remove a UCC filing if your lender submits a UCC-3 form or disputes any remaining liens that have been paid by showing proof of payment.
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