Payroll Funding Tied Up by a UCC Filing
UCC or Uniform Commercial Code documents filings are done by all secured lending organizations to perfect their interest in collateral they are lending on; it is similar to the pink slip on a car. Beware of Uniform Commercial Code UCC Filings that may be filed on your business at the Secretary of State (where your business entity is domiciled) by a payroll funding organization that you are just “talking to” or “considering” and not actually doing business with. This could be done by a large bank as well as by a privately-owned straight factoring company that purchases accounts receivables.
In some cases, an instant UCC filing on your business is an unauthorized unscrupulous tactic to get a jump on other payroll funding organizations you may be talking to. It is counting chickens before they hatch. In other cases, when you fill out an payroll funding application to be reviewed by a funding company there may be very tiny fine print in the application that allows them to file a UCC …while just looking at you. Because the fine print is so small, and because it is just an application rather than a loan contract/document, many people miss it. Staffing agencies do not regularly track UCC filings and are almost always surprised, and even angry to find about these UCC filings on their business. Sales and business development people for payroll funding companies rarely call attention to a UCC authorizing clause as it may be an obstacle to bringing in an application.
If you need short-fused payroll funding very quickly and are not going with the company that filed a UCC-1 document against you unscrupulously or by an authorizing clause in an application, you have to get it terminated very quickly. Sometimes that is easier said than done because they may delay to try and save the deal, or want to take time to resell you on their program. A failure to terminate such a UCC filing when requested is of serious legal consequence for a payroll funding company.
If you go to the website of the Secretary of State where your business entity is domiciled, you will always find pages and links for UCC Uniform Commercial Code departments/filings. You may contact them to find out how long they take to approve and formally acknowledge a new UCC-1 filing. Are they slow or behind in their processing? In some cases a UCC-1 filing may be filed by a payroll funding company and then confirmed/acknowledged electronically directly back to them, however the new UCC filing is not reflected on the State’s website. The State’s website may only be updated once a month or periodically. Such variables can affect how and when payroll funding companies choose to do their UCC filings on your company. One company could file a UCC filing on your business and may be willing to fund some amount even before it is officially acknowledged by the State, betting that everything will be OK. The size of the deal may affect the decision. They may know that your particular state sends acknowledgement within twelve hours or that the rejection rate for UCC filings in your state is extremely low. Another funding company may not fund one cent until they have official acknowledgement from the State-no matter how long the state takes.