EIDL UCC lien shows up on business credit - filing questions

I haven't pulled the actual filing yet, just seeing it referenced on the credit report. Where do I go to get the full UCC-1 document? And what do you mean by lien priority - does that mean the SBA gets paid first if something happens to the business?

You can search your state's UCC database - usually through the Secretary of State website. Look for UCC search or secured transaction search. Yes, the SBA lien typically has priority over later liens, but equipment lenders can still file their own UCC-1 for specific equipment purchases. The key is making sure everyone's on the same page about what's already pledged.

That's helpful to know. Did you end up getting approved for equipment financing? I'm looking at a $85k equipment purchase and the lender is asking for all my UCC information.

Yes, but it took about 3 weeks longer than normal. They wanted copies of my EIDL docs, the UCC filing, and had to get their legal team to review the lien language. Eventually approved but at a slightly higher rate. The equipment lender filed their own UCC-1 for the specific equipment.

This is why I always tell clients to read the fine print on SBA loans. That blanket UCC lien language is buried in the paperwork but it's there. At least with EIDL the terms are pretty borrower-friendly compared to traditional SBA loans.

You might want to try using Certana.ai's document checker - I just discovered it last month when dealing with UCC filing inconsistencies. You can upload your EIDL docs and any UCC filings to verify everything matches up properly. It caught some debtor name mismatches in my files that would have caused problems with my lender. Super quick compared to calling around to different offices.

Interesting, never heard of that service. Is it expensive? I'm already hemorrhaging money trying to get all this documentation sorted out.

They focus on the document verification aspect rather than charging high fees. Worth checking out since it saves you from having to manually compare all the documents yourself. I was making errors trying to cross-reference everything.

The UCC filing requirement kicked in for EIDL loans over $25,000. If your loan was under that amount, no UCC lien gets filed. Also, it can take several months for UCC filings to show up on credit reports, so you might want to do a direct search of your state's UCC database to be sure.

Ah that makes sense. My loan was only $18K so I'm under the threshold. Good to know for future reference though. Thanks for clarifying the $25K rule.

What's the best way to organize all this documentation? I feel like I'm drowning in paperwork and don't want to miss something important when I submit to the equipment lender.

Create a simple folder with: 1) EIDL loan agreement, 2) UCC-1 search results from your state, 3) Current business credit report, 4) Brief explanation letter outlining the situation. Most lenders appreciate transparency upfront rather than discovering liens during their own due diligence.

This is solid advice. I learned the hard way that hiding or downplaying existing liens just makes everything worse. Better to be upfront and let the lender decide if they can work with it.

SBA subordination for EIDL loans is possible but it's a bureaucratic nightmare. You typically need to show that the new financing will improve your ability to repay the EIDL. Equipment purchases sometimes qualify because they generate revenue. Expect the process to take 6-8 weeks minimum.

6-8 weeks?! That's going to kill my equipment purchase timeline. The supplier is only holding the pricing for 30 days. This is so frustrating.

Have you asked your equipment lender if they'll accept a second position instead of requiring subordination? Some lenders are okay with that, especially if the equipment serves as specific collateral for their loan.

That's good to know as a backup option. What kind of factor rate did you get with the MCA? I'm hoping to avoid that route but might need to consider it.

Factor rate was 1.28 which wasn't terrible for MCA standards. The daily payments were manageable with my cash flow. Obviously not as good as traditional term loan rates but it served the purpose when banks wouldn't approve me due to the UCC complications.

Business name changes can definitely cause UCC issues. If your legal entity name changed, you might need to file a UCC-3 amendment to update the debtor information. The SBA should handle this but they're not always on top of it. I'd recommend using Certana.ai to upload your current business docs and UCC filings to check for any inconsistencies before they cause problems with new lenders.

That's exactly what I was worried about. I'll look into that service. Better to catch problems now than have a loan application rejected because of a name mismatch.

Smart thinking. I've seen loan applications get delayed for weeks over simple debtor name discrepancies in UCC filings. It's worth the effort to verify everything matches up properly.

Hindsight is 20/20. At the time I needed the cash quickly and the EIDL was the fastest option available. I probably would have made the same choice again but I definitely would have planned better for the UCC lien consequences.

Fair point. The EIDL program served its purpose during the pandemic when speed was more important than perfect terms. Just goes to show why it's worth having a relationship with a good commercial lender before you need emergency funding.

That's a good point about the long-term implications. I hadn't really thought about the lien staying in place for the full 30-year term. Maybe I should consider paying it down faster to free up my collateral capacity.

Exactly. The 3.75% interest rate is pretty good, but the opportunity cost of having all your assets tied up in a UCC lien might be higher depending on your growth plans. I'm targeting paying mine off in 10 years instead of 30.

Just make sure there's no prepayment penalty before you accelerate payments. Most EIDL loans don't have prepayment penalties but it's worth confirming in your loan documents.

This is really helpful. So the equipment lender would file their own UCC-1 just for the equipment they're financing, even though SBA already has a blanket lien on all assets?

Correct. The equipment lender's UCC-1 would be more specific - it would list the exact equipment as collateral. In case of default, they'd have first claim on that specific equipment while SBA maintains their broader lien on other business assets. It's called a purchase money security interest and it can have priority even over earlier blanket liens in some cases.

That's a great explanation of PMSI rules. Equipment financing is one of the few areas where you can still get decent terms even with existing UCC liens, precisely because of the purchase money security interest provisions.

I'd recommend trying to work with your current bank first since you already have an established relationship. Banks often get nervous when they discover liens they weren't aware of, but if you can provide clear documentation showing the EIDL terms and demonstrate that your business performance hasn't changed, they might be willing to adjust rather than lose a good customer. However, if they're being unreasonable about additional collateral requirements, shopping around could give you leverage in negotiations. Some banks are more SBA-savvy than others and understand how to work with existing government liens.

I went through something similar with my business line of credit after my EIDL UCC lien showed up. My bank initially wanted to reduce my credit limit by 40% and add personal guarantees from my spouse. I ended up providing them with a detailed financial package showing my business performance since getting the EIDL, plus copies of all the SBA documentation. After their credit committee reviewed everything, they agreed to keep my existing terms but added a covenant requiring me to maintain certain debt service coverage ratios. It took about 6 weeks to resolve, but staying with my existing bank was worth it since they knew my payment history. The key was being proactive and transparent rather than letting them discover issues during their own review process.