The UCC Filing a Merchant Cash Advance Funder Made Against You

You usually find out from somebody else

A UCC financing statement is not served on you. Nobody calls. It is filed, it becomes searchable, and then at some point a third party finds it: a bank processing a loan application, a buyer doing diligence, a factor considering your invoices, an equipment lessor running a check.

That is how most Virginia businesses discover a merchant cash advance funder has filed against them — from the party who now wants it explained.

What it is, and what it is not

It is a public notice of a claimed security interest in described collateral.

It is not a judgment. It is not a lawsuit. Nothing has been decided and nothing has been taken. What it does is affect how other people deal with you, and in a business that needs credit or is contemplating a sale, that can be more immediately damaging than the underlying dispute.

A filing has to be authorised

This is the substantive point and it is worth stating carefully.

UCC § 9-509, as adopted in New York, provides that a person may file an initial financing statement, an amendment adding collateral, or an amendment adding a debtor only if the debtor authorises the filing in a signed record, or pursuant to the subsections that follow.

And one of those subsections does a lot of work: by signing a security agreement, a debtor authorises the filing of a financing statement covering the collateral described in that agreement.

So the question is not whether you remember consenting to a filing. It is whether the agreement you signed contains a security agreement, and what collateral that security agreement describes.

Which turns it into a document comparison

Two things to put side by side:

One. The agreement. Is there a grant of a security interest? What collateral does it describe — specified receivables, all accounts, all assets? Is the description narrow or sweeping?

Two. The filing itself. What collateral does the financing statement actually claim? Who is named as debtor — the right entity, an old entity, an individual?

Where those two match, the filing is doing what the agreement authorised. Where the filing claims materially more than the agreement describes, or names a party that signed nothing, there is a question — and it is a question with a documentary answer rather than a contestable one.

Getting one removed

Article 9 provides for termination statements, and UCC § 9-513 is the section. The route, and what a secured party is obliged to do, depends on the collateral involved and the circumstances.

This page does not state the deadline, because the provisions covering business collateral were not read for this draft and a figure guessed at here would be worse than the gap. What applies to your filing is a question for counsel with the documents, and it is a question worth asking rather than living with the filing.

Why New York law, for a Virginia business

Because the agreement chose it, and these agreements do so routinely along with a New York forum. The security agreement is construed under New York law, which is why Article 9 as adopted in New York is the relevant text here rather than the version in whichever state the filing was made.

And if there is a lawsuit as well

A filing and a claim are separate things that frequently arrive together. CPLR § 320 requires an appearance within twenty days of service of the summons, with longer periods in defined circumstances including particular methods of service. Dealing with a filing is not a substitute for appearing in a case.

What to do first, from Virginia

1. Get the filing itself, not a summary of it, and read the collateral description.
2. Find the security agreement in your advance paperwork, if there is one.
3. Compare the two, and note the debtor name on each.
4. Take both to counsel before approaching the funder about removal.

UCC lien removal covers the subject in more depth, and how an MCA lawsuit is defended covers a claim running alongside it.