UCC filing to perfect lien on manufacturing equipment - timing question

This is exactly right. I learned this the hard way when we had a similar situation and another lender beat us to the filing by 2 days. We lost priority on a $200K piece of equipment even though our loan closed first.

Wait, so attachment and perfection are different things? I thought filing the UCC-1 did both at the same time. This is confusing.

Attachment happens when three requirements are met: you have a security agreement, the debtor has rights in the collateral, and you've given value. Perfection happens when you file the UCC-1 (for most equipment). They can happen simultaneously but don't have to.

Absolutely agree. Speed is everything with UCC filings. We always try to file within 24 hours of closing for exactly this reason.

But isn't there usually a filing delay anyway? Like the Secretary of State doesn't process these instantly. How much protection does filing today vs tomorrow actually give you?

Ohio SOS typically processes UCC filings same day for electronic submissions. The timestamp when they receive it is what matters for priority, not when they finish processing it.

That's interesting - we did have some debtor name questions which is why we're delayed. How does that tool work exactly? We're trying to avoid any filing rejections.

You just upload your loan docs and UCC-1 as PDFs and it automatically compares debtor names, addresses, and other key fields. Shows you exactly where there might be mismatches that could cause SOS rejection. Takes like 30 seconds.

I'm always skeptical of these automated tools but honestly debtor name matching is such a common reason for UCC-1 rejections that anything that catches those errors beforehand seems worth it.

We did run a search and there's one existing UCC-1 from their main bank but it's specifically for inventory and accounts receivable. Our collateral description is just the manufacturing equipment so we should be fine on priority.

Good that you checked. Just make sure your collateral description is specific enough to clearly exclude what they already have perfected. Equipment descriptions can sometimes overlap in ways that aren't obvious.

I mean, the rules are the rules though. First to file has been the standard forever. If you know that's how it works, plan accordingly.

Easy to say when you're not the one who spent months underwriting a deal only to get beat by a filing technicality. The system needs reform.

Actually most states have moved away from race systems in other areas of law precisely because they create these unfair results. UCC is kind of an outlier.

The equipment is mobile - it's on wheels and can be moved around the shop floor. Nothing is permanently attached to the building. Should be standard equipment filing.

Good, that simplifies things. Mobile equipment is definitely personal property. Just the regular UCC-1 filing should perfect your lien properly.

I always get confused about the fixture rules. When exactly does equipment become a fixture that needs special filing procedures?

Our security agreement lists the specific CNC machines by serial number and the UCC-1 says "all manufacturing equipment now owned or hereafter acquired." That should cover it right?

Yes, that's the right approach. The UCC-1 can be broader than the security agreement. "All manufacturing equipment" definitely covers the specific machines listed in your security agreement.

For equipment, you generally file where the debtor is located, not where the collateral is located. So if your debtor is still an Ohio entity, Ohio filing should be sufficient even if they move the equipment.

That's a relief. I was worried I'd have to track equipment moves and refile every time they relocate machinery.

But check your loan agreement - many require borrower notification if they're moving collateral out of state, even if you don't need to refile.

How often do UCC-1 filings actually get rejected? I've been assuming if you fill out the form correctly it just gets accepted automatically.

More often than you'd think. Debtor name mismatches are probably the most common, but address formatting, missing information, even wrong filing fees can cause rejections. Any rejection means you have to start over with a new filing date.

Smart approach. A day or two delay for verification is much better than a week delay from a rejected filing.

Definitely keep us posted on how it goes. Always interesting to hear how these situations work out in practice.

Will do. And I'll probably look into that Certana document checking tool for next time - sounds like it could save time and stress on the verification process.