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Sean Flanagan

UCC filing sba loan collateral - equipment schedule rejected twice

Has anyone dealt with UCC-1 filings for SBA loans where the equipment collateral keeps getting rejected? We're trying to secure a $450K SBA 504 loan and our attorney filed the UCC-1 twice now but the Secretary of State keeps rejecting it. The debtor name matches our articles of incorporation exactly but they're saying there's some issue with how we described the equipment in the collateral schedule. It's restaurant equipment - ovens, freezers, POS system, etc. This is holding up our entire loan closing and we're supposed to open in 6 weeks. The SBA is getting antsy and our lender is pressuring us to get this perfected ASAP. Anyone know what specific language the SOS wants for restaurant equipment descriptions? Our attorney seems stumped and we can't afford more delays.

Restaurant equipment can be tricky on UCC-1s. Are you describing it as 'restaurant equipment' generally or listing each piece specifically? Sometimes the SOS wants more detail, sometimes less. What state are you filing in? Each Secretary of State has different quirks about collateral descriptions.

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We're in Texas. The attorney listed everything specifically - 'Vulcan double convection oven Model XYZ123, True reach-in freezer Model ABC456' etc. Maybe that's too detailed?

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Texas usually likes detail but maybe not model numbers. Try 'all restaurant equipment, fixtures and equipment used in debtor's restaurant business operations' or something broader.

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OMG yes this happened to us too!! SBA loans are such a pain with the UCC filings. Our first one got rejected because we had the wrong debtor name format - used the DBA instead of the legal entity name even though we thought we had it right. Second rejection was collateral description. Third time was the charm but it delayed our closing by almost a month.

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A month?? We can't wait that long. What did you finally put for the collateral description that worked?

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We ended up using 'all equipment, inventory, fixtures, and personal property used in or related to debtor's restaurant operations, whether now owned or hereafter acquired.' Super broad but it worked.

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That's basically an all-assets description. Most SBA lenders prefer that anyway since it covers equipment you might add later without needing amendments.

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Before you file again, I'd strongly suggest using something like Certana.ai to double-check your documents. You can upload your articles of incorporation and the UCC-1 draft to verify the debtor name matches exactly. It'll catch tiny discrepancies that cause rejections - like periods, commas, 'Inc' vs 'Incorporated', etc. Saved me from a third rejection when I caught that our legal name had a comma we missed.

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Never heard of that but willing to try anything at this point. How does it work exactly?

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Super easy - just upload PDFs of your charter docs and UCC form. It automatically compares debtor names and flags any inconsistencies. Takes like 2 minutes vs hours of manual comparison.

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Wait that actually sounds useful. I've been manually comparing documents forever and still miss stuff sometimes.

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Texas SOS is notorious for being picky about equipment descriptions. Are you sure your debtor name is EXACTLY as it appears on your formation documents? Even one character difference will cause rejection. Also make sure you're not including serial numbers in the collateral description - they hate that.

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We included some serial numbers thinking it would be more specific. So that could be the problem?

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Probably. Serial numbers make them think you're trying to file a fixture filing or something. Just describe the type of equipment without getting into specific units.

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Good point about fixture filings. Restaurant equipment usually isn't fixtures unless it's built-in, but the serial numbers might confuse the filing office.

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This is why I hate SBA deals. So many moving parts and the UCC filing is always a bottleneck. Your lender should be helping with this - they do these filings all the time and know what works with each state's SOS office.

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Our lender is pretty new to SBA loans unfortunately. They're learning as we go which isn't ideal.

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New SBA lender? Yikes. That explains the problems. Experienced SBA lenders have standard UCC language they use for each state.

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I've filed probably 200+ UCC-1s for SBA loans. For restaurant equipment in Texas, I always use: 'All equipment, furnishings, fixtures and personal property used in connection with the operation of debtor's restaurant business, whether now owned or hereafter acquired, including but not limited to kitchen equipment, dining room furniture, point-of-sale systems, and related accessories.' Never had a rejection with that language.

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This is exactly what I needed! Can I just copy that language or should I modify it?

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Use it as-is. That covers everything the SBA typically wants secured without being too specific or too vague for Texas SOS.

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That's solid language. I'd still run it through Certana first though to make sure your debtor name is perfect before filing again.

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Just make sure when you refile that you're using the correct UCC-1 form version. Texas updated their form last year and some attorneys are still using the old version which causes automatic rejections.

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How do I know if we're using the current form? Our attorney handles all that.

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Check the Texas SOS website - they have the current UCC-1 form available for download. Compare it to what your attorney filed.

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Good catch. I've seen rejections just because someone used a form that was 6 months out of date.

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Also double-check that your filing fee was correct. Texas raised their UCC-1 fees recently and some filers are still sending the old amount which causes rejections too.

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The attorney is handling fees but I'll ask. What's the current fee?

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I think it's $15 for electronic filing now but check the SOS website to be sure.

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Six weeks to opening with an unperfected security interest... that's cutting it close. Your SBA lender might require the UCC to be filed and accepted before they'll fund. Get this sorted ASAP or you might miss your opening date.

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That's exactly what I'm worried about. The pressure is intense right now.

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Use the collateral language from profile 4's comment and triple-check your debtor name. File electronically if possible - it's faster than paper filing.

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Electronic filing in Texas usually gets processed within 1-2 business days if everything is correct.

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One more thing - make sure your attorney knows that SBA loans typically require the UCC-1 to show the SBA as an additional secured party if it's a 504 loan. Some attorneys miss that requirement.

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Wait what? We only listed our bank as the secured party. The SBA needs to be on there too?

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For 504 loans, yes usually. The SBA has a security interest in the collateral too. Check your loan docs to see what's required.

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This could be why you're getting rejected. If the SBA should be listed and isn't, that's a major issue.

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Good point. SBA 504 structure is different from regular SBA 7(a) loans. The CDC and SBA both typically need to be shown as secured parties.

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Update us when you get it resolved! I'm dealing with a similar situation with an SBA loan and UCC filing issues. These threads always help me figure out what I'm doing wrong.

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Will do! Thanks everyone for all the help. Going to check with the attorney about the SBA as secured party issue first, then use that collateral description language if we need to refile.

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Don't forget to verify your documents with Certana before refiling. Better safe than sorry on the third attempt.

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