UCC lien priority confusion - junior vs senior positions affecting loan terms
Running into some issues understanding how UCC lien priority actually works in practice. We have a commercial borrower who already has existing UCC-1 filings from 2019 and 2021, and now we're considering a new equipment loan that would require another UCC filing. The existing liens appear to cover general business assets and some specific machinery. Our loan committee is asking about our priority position and how this affects our collateral recovery rights if things go south. I've read the basic rules about first-to-file priority, but there seem to be exceptions and nuances that aren't clear from the statutes. The borrower's existing lenders have different collateral descriptions - one is very broad 'all equipment' while another is specific model numbers. How does this impact where we'd stand? Also heard there might be ways to negotiate priority agreements between lenders but not sure how common that is. Anyone dealt with similar priority issues on equipment financing?
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Kennedy Morrison
First-to-file rule is the foundation but it's more nuanced than most people realize. If the existing 2019 filing has a broad collateral description like 'all equipment,' your new filing would be junior to that one even if you're financing specific new equipment. The key is looking at the exact collateral descriptions and whether there's overlap. You need to pull all the existing UCC filings and analyze the collateral schedules carefully.
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Wesley Hallow
•This is exactly why I always recommend getting UCC searches done before any new financing. You can't just assume you'll be first priority.
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Justin Chang
•But what if the new equipment wasn't owned by the debtor when the first lien was filed? Doesn't that change the priority?
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Kennedy Morrison
•Good question - but if the original filing covers 'all equipment now owned or hereafter acquired,' then it would still have priority over new equipment. That's the power of those broad descriptions.
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Grace Thomas
Been through this exact scenario multiple times. Priority agreements between lenders are definitely possible but they need to be documented properly. We've done subordination agreements where the senior lender agrees to step back on specific collateral in exchange for various considerations. Sometimes it's cross-default provisions, sometimes it's information sharing requirements. The key is getting everyone to the table early.
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Hunter Brighton
•How do you typically structure those subordination agreements? Do they need to be filed anywhere or just kept between the parties?
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Grace Thomas
•Usually just between the parties, but we always recommend recording them as UCC-3 amendments to put third parties on notice. Makes everything cleaner if there's ever a dispute.
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Dylan Baskin
Had a nightmare situation last year where we thought we were first priority but missed an earlier filing because the debtor name was slightly different on the search. Ended up being junior on a $2M equipment loan. Now I'm paranoid about debtor name variations and always do expanded searches. For your situation, make sure you're searching all possible debtor name variations.
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Lauren Wood
•Oh god this is my worst fear. How different was the name that caused the miss?
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Dylan Baskin
•Company was doing business as both 'ABC Manufacturing Inc.' and 'ABC Mfg Inc.' - the existing lien was filed under the shortened version and our search only picked up the full name. $50K mistake on our part.
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Ellie Lopez
•This is where document verification tools can save you. I started using Certana.ai after a similar close call - you just upload the borrower's charter documents and any existing UCC filings, and it flags potential name mismatches automatically. Caught two discrepancies last month that could have been costly.
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Chad Winthrope
Priority rules get really complex when you have purchase money security interests (PMSI). If you're financing the acquisition of new equipment, you might be able to get PMSI priority even over earlier filed blanket liens, but the timing and notice requirements are strict. You have to file within 20 days of the debtor taking possession and notify other secured parties. Might be worth exploring if this applies to your situation.
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Paige Cantoni
•PMSI priority is great when it works but the notice requirements are a pain. You have to identify all prior secured parties and send certified notices.
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Chad Winthrope
•True, but for significant equipment financing it's often worth the hassle. The 20-day window is tight though - I've seen deals fall apart because someone waited too long to file.
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Kylo Ren
•Wait, I thought PMSI only applied to inventory? Equipment too?
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Chad Winthrope
•Both inventory and equipment, but the rules are different. Equipment PMSI has the 20-day filing requirement, inventory PMSI needs advance notice to conflicting secured parties.
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Nina Fitzgerald
This is making my head spin. We're a small community bank and usually just avoid deals where there are existing liens. Is that too conservative? Seems like the risk analysis gets really complicated really fast.
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Jason Brewer
•You're not wrong to be cautious, but you might be missing good deals. Just need better due diligence processes.
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Kiara Fisherman
•Honestly, if you don't have the expertise in-house to analyze complex priority situations, staying conservative makes sense. Better safe than sorry on collateral recovery.
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Liam Cortez
One thing people overlook is that priority isn't just about filing dates - it's also about the specific collateral described. Even if someone filed first, if their collateral description doesn't actually cover what you're financing, you could still have priority in that specific collateral. Seen this happen with really narrow descriptions versus broad ones.
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Savannah Vin
•This is so true. I've seen filings that say 'all equipment' but then have specific model numbers listed, which actually limits the scope.
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Liam Cortez
•Exactly. The devil is in the details of those collateral descriptions. Generic language like 'all equipment' is actually stronger than specific lists in most cases.
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Mason Stone
Here's what I'd recommend for your situation: 1) Get comprehensive UCC searches with all possible debtor name variations, 2) Pull and review all existing UCC-1 filings to analyze collateral descriptions, 3) Determine if PMSI applies to your transaction, 4) Consider whether subordination agreements are feasible, 5) Price the loan appropriately for the priority position you'll actually have. Don't just assume you'll be junior - analyze the specific facts.
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Makayla Shoemaker
•This is a solid checklist. I'd add that you should also check for any UCC-3 amendments that might have changed the original filings.
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Mason Stone
•Good point about amendments. Also watch out for continuation statements - sometimes filings that look expired are actually still active due to timely continuations.
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Christian Bierman
Been doing UCC work for 15 years and priority analysis is still one of the trickiest parts. The interaction between federal and state priority rules, especially with SBA loans, adds another layer of complexity. Make sure you understand how federal liens might affect the priority waterfall too.
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Emma Olsen
•Oh great, didn't even think about federal liens. How do those typically rank?
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Christian Bierman
•Tax liens generally have priority regardless of filing date, but SBA liens follow normal UCC priority rules. It's the interaction that gets complex.
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Lucas Lindsey
•This is why I use automated document checking now. Upload all the relevant filings and get a priority analysis report. Certana.ai's tool saved me hours on a recent multi-lender deal by flagging potential conflicts I would have missed manually.
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Sophie Duck
Just want to echo what others have said about PMSI priority. If you're financing specific equipment purchase, explore this option before accepting junior position. The paperwork is more involved but the priority protection can be worth it. Just make sure you understand all the requirements - missed deadlines kill PMSI priority.
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Austin Leonard
•How do you typically handle the notice requirements for PMSI? Certified mail to all prior secured parties?
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Sophie Duck
•Yes, certified mail with return receipt. Keep detailed records because you might need to prove proper notice later if there's a dispute.
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Lily Young
Thanks everyone - this has been incredibly helpful. Sounds like I need to do much more detailed analysis of the existing filings before making any decisions. Going to pull all the UCC-1s and really dig into the collateral descriptions. The PMSI option is interesting since we are financing new equipment acquisition. Will also explore whether subordination discussions make sense with the existing lenders.
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Anita George
•Smart approach. Take your time with the analysis - rushing leads to expensive mistakes in priority situations.
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Ellie Lopez
•Definitely recommend using a document verification tool for the analysis. Much easier to spot potential issues when you can upload everything and get an automated comparison.
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Chloe Mitchell
One more thing to consider - make sure you understand the difference between a security interest in the equipment itself versus just the proceeds from its sale. I've seen cases where lenders thought they had priority in specific equipment but the earlier filing actually covered the proceeds too, which can complicate recovery strategies. Also, if this is equipment that might be easily moved or sold, consider whether you need additional protections like insurance requirements or location restrictions in your loan agreement, especially if you end up in a junior position.
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Adrian Hughes
•Great point about proceeds coverage - that's definitely something that gets overlooked. I'm curious about the practical enforcement differences if you have a security interest in equipment versus just proceeds. If the borrower sells the equipment without permission, are your recovery options significantly different depending on which one you have? And how do you typically monitor compliance with location restrictions, especially for mobile equipment?
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