A UCC-1 statement is a document which serves as a lien on commercial property in a business loan. UCC-1 statements can be filed for all types of assets. The filing of a UCC-1 statement for securing collateral is required for business loans under the Uniform Commercial Code (UCC).

Breaking Down UCC-1 Statement

The UCC-1 statement serves as a lien on secured collateral. Its components and filing procedures are comparable to the lien requirements in a residential mortgage loan contract.

Uniform Commercial Code

The UCC-1 statement was developed by Uniform Commercial Code directives which govern business deals and activities in the U.S. The Uniform Commercial Code is comprised of nine articles addressing activities such as sales, leases, banking transactions, administration and investing. The ninth article of the UCC is titled Secured Transactions and covers all aspects of secured loans for businesses.

UCC-1 Components and Considerations

Article nine of the UCC details the requirements for using UCC-1 statements to secure collateral in a business loan. UCC-1 statements can be used on any secured asset serving as collateral in a business loan. Assets commonly used include property, vehicles, company equipment, inventory, and investment securities.

A lender must complete a UCC-1 statement and include it in the business loan’s contract for it to be effective. Details required on the UCC-1 statement include information on the borrower and the assets being secured for the loan.

Similar to the process for all types of liens, a lender must also perfect the UCC-1 statement by filing it with the appropriate agency in the state where the business receiving the loan is incorporated. Most UCC-1 statements must be filed with the Secretary of State. Perfecting the UCC-1 statement makes the lien against the secured collateral binding. In the perfecting of the UCC-1 statement, the form will be time-stamped and assigned a file number.

The perfected UCC-1 statement serves in the same way as other types of perfected liens. It gives the lender publicly secured rights to the collateral, which makes it easier for them to take action against the borrower and ultimately receive a court order to seize the property if a default occurs.

In business lending, a company may have several perfected liens filed against various pieces of property. Thus lenders must do their due diligence to ensure that they are receiving first order collateral rights when filing a UCC-1 statement. Generally, lenders have two types of UCC-1 statements they can file: a specific collateral lien or a blanket lien.

Specific Collateral Lien

Specific collateral UCC-1 statements are the most common in real estate transactions. This type of UCC-1 gives the lender first order secured rights to a real estate property being purchased with loaned funds.

Blanket Lien

A UCC-1 statement with a blanket lien can give the lender secured rights to a range of assets. In this situation, the lender would specify a range of assets that the borrower is giving the lender rights to in the case of default on a loan. Terms of the blanket lien would then be detailed in the collateral section of the UCC-1 statement.