A Uniform Commercial Code (UCC) funding statement is a legal document used by lenders to notify their lien against personal property offered as collateral. It is filed with the Secretary of State or county and gives public notice of the relationship between creditor and debtor. The purpose is to protect the lender’s interest, but filing does not guarantee it.
A Uniform Commercial Code (UCC) funding statement is a legal document that a lender uses to notify their lien against personal property owned by the borrower. The declaration is often required in the loan process if personal property is offered as collateral to obtain the loan. The lender files the statement with the Secretary of State or the county in which the secured property is located. It gives public notice of the relationship between creditor and debtor as well as the pledge placed on the asset. The initial deposit can be changed using the UCC-3 form, which shows changes to the terms of the loan agreement or changes to the lender’s or borrower’s personal information.
The Uniform Commercial Code, which is the source of the loan statement, regulates, among other things, secured transactions between creditors and debtors. Section 9, which has been adopted in most jurisdictions, covers secured transactions and financial reporting and designates the Secretary of State as custodian of records. The public can often search the documents to find out if a statement has been filed against a corporate entity or individual. Lenders search the records to see if there is already a lien on the collateral that the borrower wants to use for the secured loan. A lender will most likely decline your loan application if a UCC loan statement has already been filed on the same collateral.
The purpose of the UCC loan statement is to protect the interest of the lender. It makes it difficult for the debtor to sell or otherwise dispose of the property when there is a lien on it. The debtor often has to pay off the balance of the debt before he can get rid of the lien. For example, a business owner applying for a secured loan and offering business equipment as collateral can often expect the lender to file a UCC Loan Statement with the Secretary of State. The declaration serves as a pledge until the entrepreneur pays off all debts.
Filing a UCC loan statement does not guarantee the lender’s interest in the borrower’s property. Article 9 of the UCC regulates who has the first rights to the debtor’s assets and lists the various factors that must be taken into consideration. The obligee’s security interest often needs to be improved in order to have a higher claim or senior claim on the security.
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