Invoice Factoring and the Uniform Commercial Code
Table of contents
- Invoice Factoring and the Uniform Commercial Code
- Uniform Commercial Code (UCC) Filing in Factoring Summary
- What does UCC stand for?
- What is a UCC financing statement?
- What is the purpose of a UCC filing?
- UCC-1 filing versus NOA Letter
- What transactions are subject to UCC?
- What are the benefits of a UCC filing in factor financing?
- What do business owners need to know about UCC filings?
- Bankers Factoring UCC Factoring Services
- Ready for the owner-employees of Bankers Factoring to help you grow your company with our invoice funding, including bad debt protection? Use our fast online factoring application or call the toll-free number 866-598-4295
Uniform Commercial Code (UCC) Filing in Factoring Summary
Factoring companies file UCC-1 financing statements to protect their interests and provide solution for the factor and its clients. UCC filings place liens on a specific asset or blanket liens on all business assets for factoring agreements. The lien reveal the factoring company’s claim to assets in the event of default. Accordingly, the UCC rules and regulations ensure constant enforcement of contracts in commercial transactions throughout the United States. The UCC instills trust in businesses having interstate deal, exchanging, trading, and getting goods.
What does UCC stand for?
The Uniform Commercial Code (UCC) is a set of laws governing commercial transactions like the sale and purchase of goods and assets in the United States (US). UCC laws are not federal legislations; instead, it is generally accepted by companies and courts. Acceptance of the UCC gives businesses trust that their contracts will be enforced the same way by US courts.
What is a UCC financing statement?
The UCC-1 filing, also called a UCC financing statement, is a legal document letting a lender to publicly declare a lien or secured interest in a company’s asset. In addition, filing the UCC financing statement states that the factoring company has an interest in their client’s assets. The financing statement is a lien the factor places on its client’s businesses, demonstrating its interest in accounts receivable (A/R).
Keep reading and Sell Your Invoices to The Best Factoring Company.
What is the purpose of a UCC filing?
UCC filings are a notice that factoring companies use to secure their claim against client assets in the sale agreement. The purpose is to protect the buyer and seller’s interest in the commercial financing transaction. UCC-1 filings can include one piece of collateral or a blanket lien on all assets.
The type of liens depends on your lender. Some factoring companies only place liens on receivables. At the same time, some factors may place blanket liens on your assets to protect their interests from default.
If you have an SBA loan, typically a blanket lien on all your assets, Bankers Factoring can still fund you with a subordination agreement with your SBA lender. We can even fund you with the IRS placing a lien on your Assets.
The UCC-1 filing set up the factoring company and its client’s relationship with the Secretary of State. In addition, the Notice of Assignment (NOA) letter sets the factoring company’s relationship with its client’s customers (account debtors).
Keep reading our full article, What is Notice of Assignment in Factoring?
UCC-1 filing versus NOA Letter
The UCC financing statement and NOA letter are documents covered under UCC laws. However, the UCC-1 filing protects the factoring agreement between the factoring company and its clients. In contrast, the NOA letter informs customers of your factoring service relationship.
| UCC-1 Filing (UCC financing statement) | Notice of Assignment (NOA) Letter |
| Factoring Company claim to personal property | Establishes factoring company control and management of receivables with account debtor |
| Places lien on receivables and/or other assets | Covered under UCC laws |
| Establishes record of what lender has right and what you owe | Streamlines receivable and payment process |
What transactions are subject to UCC?
Commercial or business transactions are subject to the rules and regulations under the UCC. Primarily, the UCC governs the sales and transfer of personal property. Most companies conduct interstate trade buying and selling goods, and the UCC standardizes business law in such deals.
Types of commercial transactions covered by UCC:
- Inventory
- Large equipment
- Office equipment
- Real estate
- Vehicles
- Receivables
- Commercial instruments
- Letters of credit
- Investment securities
What are the benefits of a UCC filing in factor financing?
UCC filings provide protection and solution for buyers and sellers. This is an added benefit in factoring agreements for the factoring company and its client. For example, businesses with too many UCC-1 liens may need help to obtain other financing. Additionally, if the factoring company purchased receivables with liens, they would be left to dry. UCC board cover sales of goods, collection, transfers, and secured deals.
Above all, your interstate sale are protected with a standard set of business laws and practices. Businesses can positively enter into new contracts without fear of financial risks.
Keep reading our full article, How Invoice Factoring Works.
What do business owners need to know about UCC filings?
Entrepreneurs and business owners are responsible for active UCC filings with their businesses. As the financing statements placing liens on your assets increase, your ability to secure another capital decreases. Accordingly, you need to understand what warrant your creditor has a secured interest in. Only allow a creditor or factoring company to file a UCC-1 statement if you know the covered assets and termination conditions.
Keep reading the full article, Business Funding Options Available to Companies with SBA Loans.
Bankers Factoring UCC Factoring Services
Invoice factoring is easy for businesses to build credit and improve cash flow. When you factor invoices, there is no negative impact on your credit score, no loan repayments, and flexible capital injection services. Selling your invoices creates a fast receivable cycle, remove the 30, 60, or 90-day wait for payment.
Our team of commercial funding experts is ready to customize a factoring program for your business. Remove cash flow barrier, create regular cash flow, offer bad debt protection, and grow your business by factoring invoices with us.