[jotucker1983]

I wanted to get some opinions of some of the contributors here on Daily Funder, because this makes absolutely no sense to me. Can someone help me understand, why in the hell are some companies still filing UCCs on good paying merchants?

- When you are boarding a new deal, it's good to have the paperwork with the merchant signed stating that a UCC could (or would) be filed in relation to the funding, but from my understanding, you don't have to file it.

- You could keep the paperwork on hand and only file it in the case of a slow paying merchant, or some other type of collection or fraud issue. This allows you, per the paperwork, to have related favorable conditions in court or during the collections procedure.

The argument could be made that you are looking to establish a certain "position" in terms of the UCC filing, but couldn't this already be diagnosed through the examination of bank statements?

Most companies are doing loan transactions today, whereas in the prior days with majority split payments (standard MCA deals), it would make more sense as to why the UCC would need to be filed because it would be difficult for someone else to know about the transaction.

It just seems completely damn asinine to me, to have a good paying merchant get harassed by 30 damn calls a day by green brokers who can't even spell "merchant cash advance". All this does is piss the merchant off to where they don't want to renew with you (the broker who closed them) anymore.

It's common damn knowledge that this is going on, so why in the hell are these UCCs still being filed on good merchants by many companies today? Can someone help me understand this?

[Funder Mark]

I know my company does not file any UCC'c, unless the client defaults.

[michaelh]

Well you have to understand that the law is based on when the UCC is filed in the case of default. The priority order is first in first out and with the amount of stacking being first to get paid makes a difference in the event of default. A UCC-1 financing statement (an abbreviation for Uniform Commercial Code-1) is a legal form that a creditor files to give notice that it has or may have an interest in the personal property of a debtor (a person who owes a debt to the creditor as typically specified in the agreement creating the debt). This form is filed in order to "perfect" a creditor's security interest by giving public notice that there is a right to take possession of and sell certain assets for repayment of a specific debt with a certain priority. Such notices of sale are often found in the local newspapers. Once the form has been filed, the creditor establishes a relative priority with other creditors of the debtor. This process is also called "perfecting the security interest" in the property, and this type of loan is a secured loan. A financing statement may also be filed in the real estate records by a lessor of fixtures to establish the priority of the lessor's rights against a holder of a mortgage or other lien on the real property. The creditor's rights against the debtor and the lessor's rights against the lessee are based on the credit documents and the lease, respectively, and not the financing statement.

[Michael I]

Well you have to understand that the law is based on when the UCC is filed in the case of default. The priority order is first in first out and with the amount of stacking being first to get paid makes a difference in the event of default. A UCC-1 financing statement (an abbreviation for Uniform Commercial Code-1) is a legal form that a creditor files to give notice that it has or may have an interest in the personal property of a debtor (a person who owes a debt to the creditor as typically specified in the agreement creating the debt). This form is filed in order to "perfect" a creditor's security interest by giving public notice that there is a right to take possession of and sell certain assets for repayment of a specific debt with a certain priority. Such notices of sale are often found in the local newspapers. Once the form has been filed, the creditor establishes a relative priority with other creditors of the debtor. This process is also called "perfecting the security interest" in the property, and this type of loan is a secured loan. A financing statement may also be filed in the real estate records by a lessor of fixtures to establish the priority of the lessor's rights against a holder of a mortgage or other lien on the real property. The creditor's rights against the debtor and the lessor's rights against the lessee are based on the credit documents and the lease, respectively, and not the financing statement.

all the stackers do coj now so even if you have a ucc you are still not first . i am with john , it makes no sense to me . the only thing i can think of is it has to do with the backend of where they get the money from and rules they need to file

[Michael I]

I know my company does not file any UCC'c, unless the client defaults.

you do coj so why will you ever need to file a ucc

[Chambo]

all the stackers do coj now so even if you have a ucc you are still not first . i am with john , it makes no sense to me . the only thing i can think of is it has to do with the backend of where they get the money from and rules they need to file

If the fund with the UCC finds out another fund is trying to execute a COJ ahead of them, it'll get squashed....

[FCF Fund]

Large funding companies are backed by major funds, those funds have covenants that the lender must comply with. Most important for the lender is securitizing themselves and/or their shareholders. In these instances its when lending operations are not in line with sales practices.

[funding pro]

It is for notification purposes as well. This goes back to when split funding was the primary repayment vehicle and you couldnt see clear as day that there were payments coming out of the bank account. In the event the merchant is trying to hide company A's advance from company B, company B should see the UCC and get clarification prior to funding. Today, the merchant could still be trying to hide it by using multiple bank accounts, doctoring the statements or even just stopping payments.

[michaelh]

you do coj so why will you ever need to file a ucc

Even if you have a confession of judgement a UCC will move that funders judgement forward when they get a judgement. COJs do nothing until you actually get a court order to seize funds and the court will give priority to the UCC judgements.

[CushionCapital1]

Bottom Line is if someone is getting unsecured working capital, due to the time use of funds, availability and risk involved it's pretty stupid to not file a UCC.

[dpFund]

While I am not a lawyer, here is another way to look at it:

We have a very strict no-stacking clause in our filed UCC. The client knows it ahead of time. In my opinion, any lender that is considering funding a client should be doing a UCC lien search (would't you if it were your money?). If some short-sighted lender does stack on top of my filed UCC (prohibiting stacking) and it contributes to a default, who do you think I am coming after (in addition to the client)?

[TheShitzuofMCA]

A good merchant yesterday could be a bad merchant tomorrow.

[Chambo]

Bottom Line is if someone is getting unsecured working capital, due to the time use of funds, availability and risk involved it's pretty stupid to not file a UCC.

it is NOT "unsecured" if there is a UCC filed.

[AndyYSCISOdept]

A good merchant yesterday could be a bad merchant tomorrow.

That's very true and it never seems to work the other way around does it? I am having a hard time thinking of a situation where a poor merchant became a great one later on.

[FCF Fund]

That's very true and it never seems to work the other way around does it? I am having a hard time thinking of a situation where a poor merchant became a great one later on.

Well it happens more often than not if you think about it, its how you define a "Bad Merchant". For me its someone who bounces payments consistently, however they do get back on track and perform well and actually grow as a business from it from time to time.

I even had a merchant default on Pearl due to external circumstances, I gave her a low risk / high reward offer and not only has she performed but she's done much better over the last year Ive funded her.

Otherwise if a merchant just goes radio silent after rejecting, well we know where that goes....