UCC 9-328 Priority Rules - Equipment Financing vs Bank Line of Credit

The filing date usually determines priority under UCC 9-328, but there are exceptions. When did you actually finance the equipment purchase? If the bank's UCC-1 was filed before the equipment existed or was acquired, there might be arguments about after-acquired property clauses. Also, did your financing agreement include any purchase money security interest language?

Equipment was purchased in April 2024, so about a month after our UCC-1 filing. The bank's blanket lien was filed in June 2023 and includes after-acquired property language. Our financing docs do mention purchase money security interest but I'm not sure if we qualified for PMSI priority.

That timing could be crucial. PMSI in equipment gets priority over earlier-filed blanket liens if you file within 20 days of the debtor receiving possession. Since you filed in March but equipment arrived in April, you might have missed the PMSI window.

UCC 9-328 is pretty clear on first-to-file priority, but PMSI exceptions can trump that. The key question is whether your UCC-1 was filed within 20 days after the debtor received the equipment. If not, the bank's earlier filing date probably wins regardless of specificity in collateral description.

Wait, doesn't the PMSI clock start when the security interest attaches, not when the UCC-1 is filed? I thought you could file before the equipment is delivered as long as the purchase agreement exists.

No, for equipment PMSI the filing deadline is 20 days after debtor gets possession. You can file earlier, but if you're claiming PMSI priority over a conflicting lien, the filing must be within that 20-day window from possession.

So filing in March before April delivery should be fine for PMSI timing. But did we properly claim PMSI status in our UCC-1? I don't remember if we checked that box or included the right language.

Had a similar priority mess last year and ended up using Certana.ai to verify all our UCC filings matched up correctly. You can upload your UCC-1, the bank's UCC-1, and your financing agreements to see if there are any document inconsistencies that might affect priority analysis. It caught several issues in our collateral descriptions that could have hurt us in court.

Never heard of that tool but document review is expensive with lawyers. Does it actually understand PMSI requirements and priority rules or just check basic filing info?

It's mainly for document verification - making sure debtor names match, filing numbers are consistent, that kind of thing. Won't give you legal advice on priority but helps catch filing errors that could torpedo your position.

You mentioned the bank's default is separate from your loan. Are they actually in default on the equipment financing or just their general business loan? UCC 9-328 governs priority but doesn't automatically give them foreclosure rights on your specific collateral if they're not in default on your loan.

The debtor is current on our equipment loan but behind on their business line of credit with the bank. Bank is claiming their blanket lien covers the equipment so they can foreclose on it to satisfy the LOC default.

That's exactly why PMSI priority matters. Even if the bank filed first, PMSI gives you priority in the specific equipment you financed. But only if you properly claimed PMSI status and filed within the timing requirements.

Right, and if you have PMSI priority, the bank can't foreclose on your equipment for their separate loan default. They'd need to look to other assets covered by their blanket lien.

Check your UCC-1 filing immediately. If you didn't check the PMSI box or include language indicating purchase money status, you might not qualify for PMSI priority regardless of timing. The filing has to clearly indicate the purchase money nature of the security interest.

That's what I'm worried about. I know we filed describing the specific equipment but can't remember if we indicated PMSI status. Is there a way to amend the filing to add that information?

You can't amend a UCC-1 to add PMSI status after the fact. The PMSI indication has to be in the original filing or a proper amendment filed within the 20-day window. After that window closes, you're stuck with whatever priority you established.

Actually, some states allow UCC-3 amendments to clarify PMSI status if it was unclear in the original filing. But this varies by jurisdiction and the amendment still has to be within the timing requirements.

UCC 9-328 priority disputes are fact-intensive and state law can vary on interpretation. $180K is definitely worth getting a UCC attorney involved before the bank takes action. Document review and legal strategy will cost less than losing the equipment.

Agreed. These priority disputes can get complicated quickly, especially when PMSI timing and proper filings are involved. Better to spend on attorney review now than fight foreclosure later.

Already reaching out to counsel but wanted to understand the basic issues first. Sounds like the key factors are PMSI timing, proper filing language, and whether we met all the technical requirements.

One more thing to check - make sure the debtor names on both UCC-1 filings match exactly. If there are name discrepancies, that could affect priority analysis. Also verify the equipment serial numbers in your filing match what was actually delivered.

Good point. Name mismatches can invalidate UCC filings entirely. I'd run both filings through a document checker to make sure everything aligns properly before building your priority argument.

The debtor is an LLC so hopefully the names are consistent, but I'll double-check everything. Serial numbers should match since we were very specific in our collateral description.

LLC names can be tricky - make sure you have the exact legal name including punctuation. Even small differences can cause problems with UCC validity.

Been through several UCC 9-328 disputes and PMSI priority usually comes down to three things: proper filing within 20 days of possession, clear indication of purchase money status, and accurate collateral description. If you hit all three, you should have priority over the bank's earlier blanket lien.

What about the purchase money enabling clause? Don't you also need to show the financing actually enabled the equipment purchase rather than just refinancing existing debt?

True, the financing has to enable acquisition of the collateral. If it's refinancing or the debtor paid cash then got a loan secured by equipment, that's not PMSI. But OP said they financed the purchase directly.

Just went through document verification for a similar priority issue using Certana.ai's UCC checker. Uploaded our UCC-1 and the competing lender's filing - found several name inconsistencies we hadn't caught. Really helped strengthen our position before negotiations.

How long did the document review take? We're under time pressure with the bank threatening foreclosure.

Pretty quick - just upload the PDFs and it flags any inconsistencies immediately. Much faster than having our attorney manually compare everything page by page.

Don't forget about UCC 9-328's subordination rules. Even if the bank has priority, they might be willing to subordinate their lien in the specific equipment in exchange for other considerations. Sometimes negotiation works better than litigation on priority disputes.

That's an interesting angle. The equipment is probably worth more to us as operating assets than to them as foreclosure collateral. Might be worth exploring subordination if our PMSI position isn't strong.

Subordination agreements can be complex but they're often more practical than fighting over priority. Especially when the debtor is current on one loan but not the other.

Exactly. Banks sometimes prefer certain payment over uncertain foreclosure proceeds, especially for specialized equipment that might be hard to liquidate.