Equipment Finance Lease Basics UCC Lien - When Does Lessor Need Filing?

Agreed on the finance lease classification. Also that fixture filing question is important - if it's getting bolted down permanently you might need to file in real estate records too, not just central UCC filing.

Wait, is the $1 purchase option really that clear cut? I thought there were other factors to consider for lease vs finance classification.

The $1 option plus 5-year term on equipment that probably has 7-10 year useful life makes it pretty obvious. You're right there are other factors but this one's straightforward.

Good point about the payment calculation. $192K total payments on $180K equipment definitely suggests we're financing the full value. How specific should I get with the collateral description?

I usually go with manufacturer, general equipment type, and serial number if available. Something like 'ABC Corp Model XYZ packaging equipment, serial number pending'. Gives you enough specificity without being overly restrictive.

Make sure you get that serial number before filing though. I've had deals where we filed too early without the serial and had to amend later.

How does that work exactly? Do you just upload PDFs?

Yeah, just upload the lease docs and UCC forms as PDFs. It automatically checks if debtor names match exactly, flags any inconsistencies in collateral descriptions, and verifies filing requirements. Takes like 2 minutes vs hours of manual comparison.

That sounds useful for equipment deals where you have multiple documents to coordinate. I've definitely had issues with small name variations between lease and UCC filing.

Oh wow, I hadn't thought about that. The equipment does get permanently mounted. How do I determine if it's a fixture?

Look at three factors: attachment to real estate, adaptation to the property's use, and intention of permanence. Packaging equipment bolted down in a warehouse sounds like it could qualify. Better safe than sorry - consider dual filing.

Fixture filings are tricky. Different states have different rules too. Some require both UCC fixture filing AND real estate filing.

This is getting complicated. Maybe worth paying the legal team rush fee after all.

Simple but accurate advice. Sometimes we overcomplicate these equipment deals.

True, but the fixture filing could be important for priority if there are other liens on the property.

Yeah, the filing fee is nothing compared to the loan amount. Better to be over-secured than under-secured.

Exactly. I always tell clients that UCC filing is cheap insurance on equipment deals.

Plus if you're wrong about it being a true lease, you're in much worse position trying to explain to your credit committee why you didn't file.

Good catch. A lot of people forget about the 5-year continuation requirement.

Yeah, I've seen deals where the UCC filing lapsed right before default. Not a good look.

Debtor should be whoever has rights in the collateral - so the lessee company. Personal guarantors don't typically get listed as debtors on UCC filings unless they have ownership interest in the equipment.

Makes sense. I was overthinking it.

Just make sure you get the exact legal name of the company from their charter documents. Small variations can cause filing problems.

How long does the verification take?

Pretty much instant. Upload the PDFs and get results immediately showing any mismatches or issues.

That could be helpful for our equipment finance deals. We've had a few UCC rejections due to name/description issues.

The equipment will stay in one warehouse but the company does have locations in three states. Do I need to file in all of them?

Generally you file where the debtor is organized/incorporated, not where the equipment is located. But double-check the debtor's state of organization.

This is why I always verify the debtor's organizational documents before filing. State of incorporation determines where to file.

Thanks everyone. This thread convinced me to proceed with UCC filing immediately. Will research the fixture filing issue separately.

Smart move. Equipment finance deals need proper lien perfection and you clearly have a security interest here.

Glad you're getting it sorted. Equipment lease UCC issues can get messy if not handled upfront.

Let us know how the filing goes. Always interested in hearing how these equipment deals work out.

Great question! Here are the key red flags that scream "UCC filing needed": 1) Bargain purchase options (like $1 or 10% of original cost), 2) Total lease payments that equal or exceed 90% of equipment's fair value, 3) Lease term covers 75%+ of the asset's useful life, 4) Lessee gets title automatically at lease end. If you see any of these, it's almost certainly a finance lease. The gray areas are usually short-term leases with market-rate purchase options where payments are well below asset value.