What are UCC records and why do I keep seeing them mentioned everywhere?

OK that makes sense about the equipment loan. So these are filed with the state? And anyone can search them?

Exactly - filed with the Secretary of State office in most cases. Yes, theyre completely public records that anyone can search. Thats the whole point - to give public notice of the security interest.

This is why UCC searches are standard in M&A due diligence. Buyers want to know what liens exist against the target company's assets before closing.

Wait, they expire after 5 years? What happens if the lender doesn't file a continuation?

The filing lapses and becomes ineffective. The lender loses their perfected status and could lose priority to other creditors. That's why lenders track continuation deadlines carefully.

I've seen this happen - lender forgot to file continuation and lost their security interest to a junior creditor who filed after the lapse. Expensive mistake.

That sounds useful for lenders but what about borrowers? Should I be checking what's filed against my business?

Absolutely. You should know what liens are out there and make sure they're accurate. Wrong debtor name or incorrect collateral description could create problems down the road.

Good point about accuracy. I've seen UCC-1s with slight name variations that created uncertainty about coverage. Always worth verifying the exact legal entity name matches.

So if I have an ABL facility, there's definitely going to be UCC filings against my company?

Almost certainly. ABL lenders typically file broad UCC-1s covering all assets, including after-acquired property. They want a blanket lien on everything.

And they usually require first priority position, so any existing UCC filings would need to be subordinated or terminated before they'll close.

Great, another thing to worry about. How do I know if something qualifies as a fixture?

It's fact-specific but generally involves the degree of attachment and intent. HVAC systems, built-in equipment, manufacturing equipment bolted to concrete pads - could all be fixtures.

The safest approach is dual filing - regular UCC-1 and fixture filing - to cover all bases. Belt and suspenders approach.

So if I'm incorporated in Delaware but all my assets are in California, the UCC filing goes in Delaware?

For most personal property, yes. Delaware would be the correct filing jurisdiction. But fixtures would still be filed in California where the real estate is located.

This is why you see a lot of Delaware UCC filings even for companies that don't operate there. Delaware incorporation is common for large companies.

That's smart - I should probably be doing regular UCC searches on my own company to see what's out there.

Definitely. You'd be surprised how often you find old filings that should have been terminated or discover slight name variations that could cause problems.

We found three terminated loans that still had active UCC filings last audit. Had to chase down termination statements from the old lenders.

This explains why the potential acquirer is doing UCC searches on us. They want to know what they're really buying.

Exactly. They need to understand what assets are encumbered, what priority positions exist, and what payoffs would be required to transfer clean title.

And don't forget about personal guarantees - those might require separate releases even if the UCC filings are terminated.

Thanks everyone - this has been incredibly helpful. I feel like I actually understand what UCC records are now and why they keep coming up.

You're welcome. The key takeaway is they're a normal part of secured lending - nothing to be worried about as long as they're accurate and properly maintained.

Agreed. Just make sure you understand what's filed against your company and verify the information is correct. Knowledge is power in this area.

That's a good point. I should look at what exactly is covered by the UCC filing from our equipment loan.

Right - it might just cover the specific equipment financed, or it could be broader depending on the loan agreement terms.

This is another area where Certana.ai helps - it can analyze collateral descriptions and flag overly broad or potentially problematic language in the filings.

Collateral descriptions need to reasonably identify the property but don't have to be super-specific. 'Equipment' is usually sufficient, but 'stuff' probably wouldn't be.