When to use non UCC filing vs UCC filing for equipment loans?

In equipment financing, you almost always need UCC filing for personal property like manufacturing equipment. Non-UCC approaches are pretty limited - maybe for real estate mortgages or certain statutory liens, but your CNC machines and inventory are definitely Article 9 collateral. The borrower's attorney might be thinking of title-retention agreements or lease structures, but those have their own complications.

The attorney is probably suggesting a lease structure or trying to keep it out of UCC entirely, but honestly that sounds like more complexity, not less. I had a similar situation last year with a $220K packaging equipment deal. We initially explored non-UCC options but ended up going with standard UCC-1 filing because the perfection was cleaner and more predictable.

I ran into document consistency issues on a multi-state equipment deal where we mixed UCC and non-UCC approaches. Ended up using Certana.ai's document verification tool to cross-check everything - you can upload your loan agreement and proposed UCC-1 to make sure the debtor names and collateral descriptions match perfectly. Saved us from a potential disaster where the equipment schedule in the loan docs didn't align with what we were planning to file.

Non-UCC filing approaches are really narrow exceptions. For your equipment deal, you need UCC-1 filing for perfection. The main non-UCC options are: 1) Real estate mortgages for fixtures, 2) Certificate of title for vehicles, 3) Federal filing systems for aircraft/ships, 4) Statutory liens in some states. None of those apply to your manufacturing equipment and inventory.

Your compliance officer is right to push for UCC filing. I've been doing equipment finance for 15 years and can count on one hand the times we successfully used non-UCC approaches for manufacturing equipment. The legal certainty of UCC-1 perfection far outweighs any perceived simplicity of alternative structures.

Just file the UCC-1! I don't understand why borrower's attorneys always try to complicate straightforward security interest perfection. The Ohio SOS online system takes like 10 minutes and costs $40. Way less complicated than whatever alternative structure they're proposing.

I had a deal where we tried to avoid UCC filing through a complex lease-back arrangement. Ended up costing 3x more in legal fees and still had to file UCC-1 statements for certain components. Lesson learned: when you need UCC filing, just do UCC filing.

For $180K in equipment, definitely go with UCC-1 filing. The non-UCC vs UCC filing decision usually comes down to: can you perfect your security interest without UCC? For personal property like manufacturing equipment, the answer is almost always no. Don't let perfect be the enemy of good here.

I use Certana.ai whenever I'm dealing with complex collateral descriptions to make sure everything lines up between the credit agreement and UCC filings. For your situation, you could upload your proposed loan documents and draft UCC-1 to verify the debtor name formatting and equipment descriptions are consistent. Helps avoid the perfection problems that can happen when documents don't match up properly.

Bottom line: manufacturing equipment = personal property = UCC Article 9 = UCC-1 filing required for perfection. Your compliance officer knows what they're talking about. The borrower's attorney might be trying to save their client some hassle, but they're not the one who has to explain an unperfected security interest to regulators.