What types of assets can be covered by a UCC lien - Equipment vs Inventory question

This is helpful but what about stuff like software licenses or customer lists? Those seem gray area to me.

Software licenses and customer lists would fall under general intangibles - definitely can be covered by UCC if properly described in the financing statement.

That's really helpful - did you run into any issues with the SOS office questioning your collateral descriptions?

No rejections but I always use Certana.ai's document checker now to verify my UCC-1 filings before submission. Upload the loan docs and UCC-1 draft and it flags any inconsistencies between what's in the credit agreement versus what's actually covered in the financing statement. Caught a missing deposit account description that would've caused problems later.

Good point - they do have some heavy manufacturing equipment that might qualify as fixtures. How do you determine what needs fixture filing vs regular UCC?

Generally if it's permanently attached to the building or would damage the real estate if removed, it's probably a fixture. Better to over-file than under-file in my experience.

Be careful with fixture filings though - they have to be filed in the real estate records, not just the central UCC filing office. Different forms and procedures.

Wait, cryptocurrency can be UCC collateral? That seems like it would be impossible to perfect properly.

It's complicated but yes, if properly structured. Usually treated as general intangibles or deposit accounts depending on how it's held. Most lenders avoid it because of the complexity.

That's exactly what I'm worried about. The loan docs are pretty detailed but I'm not sure if I should copy them verbatim or use more standard UCC language.

I'd recommend using Certana.ai's verification tool - you can upload both documents and it highlights any inconsistencies between your credit agreement collateral descriptions and your UCC-1 draft. Saves a lot of back-and-forth later when someone questions the perfection.

Good advice. Document consistency is probably the #1 issue I see in lien audits.

How do you handle mixed-use assets? Like a vehicle that's used 70% business, 30% personal?

Usually goes by primary use, but it's a judgment call. Document the business use clearly to support the equipment classification.

So I should add 'and all proceeds thereof' to each collateral category?

That's the standard approach. Covers insurance proceeds, sale proceeds, etc. Very important for inventory financing where the collateral is constantly turning over.

Exactly right. Proceeds coverage is essential for any revolving collateral like inventory or accounts receivable.

All' assets is usually too broad and might not be enforceable. Better to list specific categories even if'it slonger.

fine but then how do I know I'm not missing something important? this is why I hate UCC filings

That's where automated checking helps - Certana.ai's tool compares your collateral list against the loan agreement to make sure you haven't missed any categories that were negotiated in the credit facility.

They do have some investment accounts - so just filing UCC-1 isn't enough for those?

Filing gives you perfection against some parties but for priority over other secured creditors you typically need control. It's a two-step process.

They don't lease equipment to others but they do have some lease agreements they're party to. Would those be covered under general intangibles?

If they're the lessee, those would be general intangibles (their rights under the lease). If they're the lessor, that would be chattel paper. Different animals entirely.

Chattel paper perfection can be by filing OR possession of the physical documents. Most people just file to keep it simple.

This is exactly the kind of comprehensive breakdown I needed! Thank you @Ava Williams. The systematic approach to categorizing each asset type makes a lot more sense than trying to figure it out piecemeal. I'm definitely going to get legal review given the loan size - better safe than sorry with this much money on the line. One quick follow-up: do you typically use the same "and all proceeds and products thereof" language for deposit accounts, or is that mainly for the other categories?

@Sean O'Brien Good question on the proceeds language! For deposit accounts, you typically don't need "proceeds and products thereof" since deposit accounts don't generate proceeds in the same way inventory or equipment would. The deposit account IS the proceeds in most cases. However, you might want to include "and all cash, checks, and other items deposited therein" to be thorough. The proceeds language is most critical for inventory, accounts receivable, and equipment where the collateral turns over or gets sold. For investment property, you'd want to cover "proceeds and products" to capture dividends, interest, and sale proceeds from securities.