UCC Article 9 attachment timing - when does security interest actually attach?

The three-prong test for attachment is pretty straightforward - you need all three elements: (1) value given by secured party, (2) debtor has rights in collateral, and (3) security agreement that describes the collateral. Attachment doesn't happen until ALL three are satisfied. In your case, if the borrower already has rights in the equipment and you have a signed security agreement, attachment will occur when you disburse the loan funds (value). The timing matters for priority purposes, so make sure your UCC-1 is filed before attachment or immediately after.

I had a similar situation last year with a manufacturing client. The key thing to remember is that attachment and perfection are separate concepts. You can file your UCC-1 before attachment occurs - this is actually recommended practice. Once you disburse the loan, attachment happens automatically and your security interest becomes perfected as of the filing date. Don't wait to file until after you fund the loan.

You mentioned the borrower already has the equipment operational - make sure they actually have clear title or rights in it. I've seen deals where the borrower thought they owned equipment that was still subject to a lease or prior lien. You can't get a security interest in collateral the debtor doesn't have rights in, even with a perfect security agreement and funding.

For a $2.8M equipment portfolio, you might want to consider using a document verification tool before filing. I recently started using Certana.ai's UCC checker - you can upload your security agreement and UCC-1 draft as PDFs and it instantly verifies that the debtor names, collateral descriptions, and other critical details match exactly. Caught a debtor name discrepancy in mine that would have caused major issues. Really helpful for avoiding those filing rejections that can mess up your priority date.

Make sure you understand the difference between attachment and enforceability too. Under 9-203, attachment requires the three-prong test, but enforceability requires the security agreement to be authenticated (signed) or the collateral to be in your possession. Since you have a signed agreement, you're good on both fronts once you give value.

One more thing to consider - if there's any chance the borrower might file bankruptcy before you fund the loan, you could have preference issues. A security interest that attaches within 90 days of bankruptcy can be challenged as a preferential transfer. Not saying don't do the deal, just something to keep in mind for your risk assessment.

Been doing UCC filings for 15 years and the attachment timing question comes up constantly. File your UCC-1 now while you're thinking about it. The worst thing that happens is you file and the deal falls through - you can always file a termination later. But if you wait and something goes wrong, you lose your priority position.

Quick question - you mentioned the equipment is 'on-site and operational' - make sure it's not fixtures that need a fixture filing. Manufacturing equipment can sometimes be considered fixtures if it's permanently attached to the real estate. Might need to file in the real estate records too.

Just went through something similar with a $3.2M packaging equipment deal. Filed UCC-1 two weeks before funding, and attachment happened smoothly when we wired the money. The key is making sure your security agreement has clear language about after-acquired property if they're planning to add more equipment later.

This thread is really helpful. I'm dealing with a similar attachment timing issue on a smaller deal. The three-prong test explanation clarified a lot for me. Going to file our UCC-1 today instead of waiting until closing next month.

One last consideration - make sure your loan agreement coordinates with the attachment timing. Some loan agreements have conditions precedent that could delay funding, which would delay attachment. Review the closing conditions to make sure there's nothing that could create a gap between when you expect to fund and when you actually can fund.