UCC-1 Statement
Candlefocus EditorThe most common type of UCC-1 statement is the blanket lien, in which the entire inventory or equipment of a business is pledged as collateral. This type of filing covers all current and future purchases or assets, with the purpose of granting the lender a larger measure of protection in case of default. On the other hand, a lien attached to a specific collateral applies only to the asset specified in the filing and is commonly used when high-value assets are part of the loan agreement.
A UCC-1 filing must include all the necessary information for filing a lien, such as the name of the debtor and the lender, the date of the agreement and the type of asset pledged as collateral. Furthermore, the form must notify the public and parties engaged in the transaction of the lender's claim to the pledged asset. This notification is also an important part of the filing as it creates a record of the lender’s intent and reduces the risk of borrowers’ granting additional loans or selling their pledged assets without the lender's knowledge.
UCC-1 statements can be confusing to understand, yet they are an important part of any loan agreement. Because of their complexity and the legal risks involved in creating them, lenders are encouraged to seek the assistance of legal professionals when ensuring the forms are correctly filed. By creating accurate and detailed UCC-1 statements and registering them, lenders can protect their interests in case of default and ensure a smooth process of collecting their collateralized assets.