What Is a UCC Lien and What Can an MCA Funder Do With It?

If you took a merchant cash advance, there is a very good chance a lien was filed against your business the week you signed, whether or not anyone told you. This article explains what that filing is, what it can and cannot do, and how liens get released. It is education, not legal advice: for decisions about your own contract or collateral, consider speaking with a licensed attorney in your state.

What is a UCC-1 financing statement in plain English?

A UCC-1 financing statement is a one-page public notice, filed with a state office, saying that a creditor claims a security interest in some or all of a business’s property. It is not a lawsuit, not a judgment, and not a seizure. It is a flag in a public database that tells every other lender, buyer, and funder: this business’s assets may already be spoken for.

The UCC is the Uniform Commercial Code, a set of commercial laws adopted in every state. Article 9 governs secured transactions, and the financing statement is its notice mechanism. MCA funders file UCC-1s as a matter of routine, usually within days of funding, because the filing establishes their place in line against other creditors.

Two things surprise most merchants. First, the filing happens at origination, not at default. It is not a punishment; it is the funder locking in priority from day one. Second, the filing is public. Anyone, including competing funders, banks, and buyers, can search it.

What assets does an MCA lien cover?

Usually far more than the receivables the contract nominally purchased. Most MCA-related UCC-1s describe the collateral as “all assets” or a long list that amounts to the same thing: accounts receivable, inventory, equipment, deposit accounts, general intangibles, and proceeds.

That gap matters. The MCA agreement says the funder bought a slice of your future revenue. The financing statement often claims a blanket position over everything the business owns. Published attorney commentary on MCA collections describes blanket “all assets” filings as the industry norm rather than the exception. Whether the underlying security agreement actually supports a filing that broad is a question worth putting to a licensed attorney, especially if the lien is blocking something important.

How do I find out who filed against my business?

Search your state’s UCC index. Every state maintains a searchable database of financing statements, usually through the Secretary of State, and most merchants never learn they can look. In order:

1. Find the filing office. For a corporation or LLC, filings are made in the state where the entity is registered, not necessarily where you operate.
2. Search by your exact legal name. Use the business name on your formation documents, not your trade name. Try close variations too.
3. Pull each filing. Note the secured party’s name, the file date, and the collateral description. MCA funders often file through agents or affiliated names, so the secured party may not match the brand on your contract.
4. Map filings to contracts. Match each lien to an advance. Orphan filings from advances you paid off years ago are common, and they still show up in searches until terminated or lapsed.

This search costs little or nothing in most states and is the first thing any serious review of your position should include.

How does a UCC lien block new funding or a sale?

Because everyone who might give you money checks the index first. A bank underwriting a loan, a factoring company, an equipment lessor, or a buyer doing due diligence runs a UCC search early in the process. A blanket filing from an MCA funder tells them someone else claims first rights to the very assets they would rely on.

The practical effects show up in predictable places: a bank declines or requires payoff of the MCA at closing, a new funder demands a subordination the existing funder refuses to give, or a business sale stalls because the buyer’s due diligence team finds three active filings and will not close until each is released. The lien does not need a courtroom to cost you money. Its power is mostly preventive: it sits in the record and quietly narrows your options. If a sale is the plan, our guide to selling or closing a business with MCA debt covers payoff letters and consent.

Distress in this market is common, not rare, which is one reason the filing index is so crowded with MCA liens:

Can a funder seize assets with just a lien?

Generally, a filing alone does not empty your bank account or tow your equipment. The UCC-1 is notice of a claim, not a court order. But after a default, the picture changes, because Article 9 gives a secured party real remedies and the filing is the foundation under them.

The most common post-default move is not physical seizure at all. It is notification: letters to your card processor, marketplaces, or customers directing them to pay the funder instead of you, which is how revenue gets intercepted at the source. That tactic has its own rules and its own article: see can an MCA funder contact my customers about my debt? Account freezes, by contrast, usually follow a court judgment rather than the lien itself, and judgments can arrive with startling speed when the contract contains a confession of judgment, which is covered in what is a confession of judgment in an MCA contract?

So the honest summary is: the lien is not the seizure, it is the license plate on the machine that does the seizing. Whether any particular remedy is available against you depends on your contract, your state, and whether a default has actually occurred, all of which are questions for a licensed attorney.

How do UCC liens get terminated or released?

A lien ends one of three ways: the secured party files a UCC-3 termination statement, the filing lapses after its five-year effective period without a continuation, or the parties negotiate a release as part of a payoff or settlement.

In a negotiated resolution, the termination should never be an afterthought. A written settlement agreement typically spells out that, upon the agreed payment, the funder files the UCC-3 within a stated window. Getting that promise in writing before money moves is standard practice, because the filing is the funder’s leverage and the merchant’s cloud. Every case is different: nothing here is a promise that any funder can be made to release a lien, and results vary in every negotiation.

What if the funder refuses to file a termination after payoff?

Article 9 has an answer for this, and it is worth knowing it exists even though using it is a job for a licensed attorney. In general terms, once the secured obligation is satisfied, the code lets the debtor send an authenticated demand, after which the secured party is required to file or provide a termination within a short statutory window, and the statute provides remedies when a secured party fails to comply.

Practically, the sequence most professionals describe looks like this: confirm the debt is actually satisfied and keep the proof, send a written demand identifying the filing, give the statutory period to comply, and escalate through an attorney if the filing does not appear. Stale liens from long-dead advances are one of the most common and most fixable problems in UCC searches, but “fixable” runs through the statute and, when needed, through counsel you choose independently.

A lien that should not be there is also a fact worth raising in any broader negotiation over an active advance. If your business is juggling active positions on top of stale filings, that bigger picture is what our UCC lien and default help service reviews, and an honest read of it costs nothing. Whether an MCA’s lien even rests on a true receivables purchase is its own deep question, explored in is my merchant cash advance actually a loan in disguise?

Common questions