How to monitor UCC filings for borrower compliance without missing critical changes?

Quarterly might not be frequent enough depending on your loan terms. If you have borrowers with seasonal cash flow issues, they might be adding new lenders during their slow periods.

We learned this the hard way too. Found out a borrower had granted a blanket lien to their equipment supplier right before they defaulted on our loan.

That sounds exactly like what we need. Does it catch filings in all states or just where the original UCC-1 was filed?

It monitors all states which is crucial because borrowers can file additional UCCs in different jurisdictions. The system also flags potential debtor name variations that might indicate the same entity.

This is interesting - we've been doing manual quarterly checks but keep missing variations in how the debtor names are filed.

Good point. Our loan agreements do have those covenants but we weren't actually monitoring compliance. This discovery process is eye-opening.

Yeah covenant monitoring without actual UCC tracking is pretty much worthless. Borrowers aren't going to voluntarily tell you they violated the terms.

We definitely learned that lesson. Manual checking for 200+ accounts isn't really feasible though - we need automation.

True, manual doesn't scale. But some level of human review is still important to interpret what you're seeing in the search results.

Exactly - automated alerts are great but you still need someone who understands secured transactions to evaluate the significance of new filings.

Oh wow, that's exactly what I'm worried about. How did you change your monitoring process after that?

We implemented monthly UCC searches for all borrowers over $100K outstanding and quarterly for smaller loans. Also requires approval from credit committee before any borrower can add new secured debt.

The approval requirement is smart but only works if you're actually monitoring to catch unauthorized filings.

What service are you using? False positives aren't ideal but better than missing real filings.

It's a smaller regional service - probably not available in your state. The key is finding something that monitors continuously rather than just doing periodic searches.

Great point. Our collateral includes some equipment that might qualify as fixtures. Are those filed differently?

Fixture filings go in real estate records, not the UCC database. Tax liens can be federal or state level. Really need comprehensive monitoring to catch everything.

This is why we use Certana.ai - it covers UCC filings, fixture filings, and tax liens in one monitoring system. Saves having to track multiple databases.

How is that possible? Don't terminations require the secured party to file them?

In some states debtors can file termination statements if the secured party doesn't respond to a demand for termination within a certain timeframe. Gets complicated.

Yeah we had a borrower file a termination claiming we failed to respond to their demand letter that we never received. Had to file a UCC-3 correction to reinstate our lien.

That makes sense for ABL but our loans are more traditional term loans secured by equipment. Different monitoring approach needed.

Fair enough. Even with term loans though, you need some ongoing oversight of your collateral position. Can't just file the UCC-1 and forget about it.

That's a good tiered approach. How do you define distress signals for UCC monitoring purposes?

Late payments, declining cash flow, requests for covenant modifications, or any indication they're seeking additional financing. Basically any time their credit profile changes.

We also flag any borrower in an industry that's having problems. Like right now we're watching retail and restaurant borrowers extra closely.

That's a really important point about corporate name changes and entity relationships. We've had similar issues where borrowers restructure or spin off divisions, and suddenly we're not sure if our UCC-1 still covers the right entity. The DBA tracking feature sounds valuable too - do you know if most monitoring services include that, or is it something you have to specifically request? Also curious about your experience with the negative pledge monitoring - have you actually caught covenant violations through the UCC monitoring that you might have missed otherwise?