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Filing Mistakes on UCC1 Financing Statements You Need to Avoid

April 17, 2014

We have previously posted several tips on how to avoid errors when filing a UCC1 Financing Statement, and in this blog post we’ve rounded up some of the most common mistakes.  Submitting  a UCC1 Financing Statements with mistakes may have legal consequences, so double check your filing for any of the errors listed below to minimize your risk.

1. Failing to file under the exact legal name

A UCC filing must properly identify the debtor to effectively perfect a security interest. To satisfy this requirement, it is critical to use the debtor’s exact legal name on your UCC1 Financing Statement.

For a business name that means the name is it appears on their formal organizing paperwork such as articles of incorporation/organization or partnership agreement.

Determining the exact legal name for an individual can be difficult. In most cases it will be the name on a person’s driver license or state-issued identification card, but it is a good to check the specific state UCC filing rules before filing on individual names to guarantee compliance.

2. Including “dba” notation as part of a debtor name

Examples: Debtor: John Smith dba ABC Trucking or ABC Trucking, Inc. dba Truck World

Secured parties will sometimes include a “dba” name as shown above in an attempt to more clearly identify their debtor. By structuring their debtor names in this way; secured parties are actually failing to file under the exact legal name. A better choice would be to add the tradename as an additional debtor, omitting the “dba” tag from the name.

3. Filing document in the incorrect filing office

Revised Article 9 established that UCCs are filed based on the location of debtor NOT the location of the collateral. Here is an overview:

  • Registered Business: file in their home/domicile state
  • Unregistered Business: file in the state where they have their chief executive office
  • Individuals: file in their state of residence

4. Missing attachment pages

If your Financing Statement requires attachment pages to list out specific collateral, make sure to carefully review all pages of the attachment before submitting the document for filing. Missing attachment pages can cause a UCC to inadequately describe the collateral, which could prove very dangerous in the event of a competing claim.

5. Incorrect filing fee

One of the primary duties of the filing officer is to ensure that proper payment is remitted. A document that is presented for filing with the incorrect filing fee will be rejected.

To guard against damaging filing mistakes, consider working with a service provider that performs a thorough quality review of your documents prior to submission. A well-trained eye can catch many of these before it’s too late.

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A Factor’s Perspective on Pre-Filed UCC Financial Statements

April 10, 2014

Under Revised Article 9 of the Uniform Commercial Code, secured parties are permitted to pre-file UCC Financing Statements, meaning they may file their UCC document before official execution of the security agreement provided the secured party receives proper authorization from the borrower. This week, we welcome Steve Capper of Flexible Funding as a guest author on the FCS blog. In this piece, Steve offers some words of caution for borrowers about pre-filed UCC’s.

Enter Steve:

A Factor’s Perspective on Pre-Filed UCC Financial Statements

Beware of Uniform Commercial Code UCC Filings that may be filed on your business by a 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, a pre-filed UCC filing on your business is a tactic to get a jump on other funding organizations you may be talking to. It is counting chickens before they hatch. In other cases, when you fill out 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. Most businesses do not regularly track UCC filings and are usually surprised, and even angry to find about these UCC filings on their business. Sales and business development people for funding organizations rarely call attention to a miniscule UCC authorizing clause, as it may be an obstacle to bringing in an application.

If you need short-fused funding very quickly and are not going with the company that filed a UCC-1 document against you 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 to save the deal, or want to take time to resell you on their program. The best way to get the document terminated quickly is to make an authenticated demand for the secured party to terminate their pre-filed UCC. A secured party’s failure to terminate such a UCC filing after having received such can result in serious legal consequences for the funding company.

About the Author

Contributed by Steve Capper, Principal/CEO of Flexible Funding, LLC, San Francisco, CA. Flexible Funding specializes in payroll funding for staffing agencies across the nation. You can visit their website for more information http://www.flexiblefund.com/ or reach them by phone at 800-487-8327.

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How to Choose a Monitoring Program for Asset-Based Lenders and Factors

April 3, 2014

In honor of the 2014 Factoring Conference, we compiled some of our favorite tips on choosing a lien monitoring solution, a service that all asset-based lenders and factors need to help mitigate risk. Here is a quick ‘stress test’ you can give your lien monitoring approach to see if it’s up to scratch.

Does your lien monitoring program…

 

Quickly Alert You of Federal Tax Lien Filings?

Many creditors consider Federal Tax Liens the most urgent of all liens because they can prime a perfected UCC. For factors and asset-based lenders, it’s critical to know about a Notice of Federal Tax Lien as soon as possible, so they can act within the 45-day window—remember, a UCC only provides priority protection for 45 days if a Federal Tax Lien is filed.

“In the real world of getting tough deals done, nothing can replace the importance of knowing if and when a Federal Tax Lien is filed.”

– Darrell Pierce, Dkyema Law Group

Notify you of Junior UCC1 Filings and UCC3 Change Statements?

Monitoring debtor names for junior UCC1 filings can reveal if another creditor has taken a position with your debtor and the possible breaking of negative covenants. Monitoring for UCC3 change statements provides creditors timely information on any unauthorized changes to their perfected UCC, such as an unauthorized termination.

Include State Tax Liens and Judgment Liens?

Many secured parties also insist on monitoring for State Tax Liens and Judgment Liens. For State Tax Liens, being alerted right away if their borrower is failing to pay their taxes is vital as it could be an indication of financial distress, while Judgment liens can be a good indicator of character among other things.

The FCS team will be at booth #215 with prizes, networking opportunities and information on our Account Monitoring Program. Please stop by and say “Hi!”

First Corporate Solutions is committed to uncovering name variations and locating involuntary and hidden liens in both our online search system and our manual search efforts. Contact us today for more information on search services: 800.406.1577 | info@ficoso.com

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FCS Online UCC and Lien Search System Adds Arkansas, Maine, Vermont and Wyoming

March 27, 2014

4 states

We are delighted to announce we have expanded our online UCC and lien search system to include Arkansas, Maine, Vermont and Wyoming. Starting Monday, March 31, active users may log on to ficoso.com and search our reliable data obtained directly from the states.

These new states add 1,407,279 UCC and lien documents to our online system.

Use our broad-based search engine to locate liens by debtor name or file number, then use our unique sorting and filtering features to create a customized search result tailor made for your specific transaction. Online search history is saved for a period of 90 days for quick access to completed searches and associated images.

Benefits You Will Enjoy as a First Corporate Solutions Online User

  • Self-search online for a low cost alternative to a manual search effort
  • Incur no correspondent fees, no set up fees, no monthly minimums
  • Broad-based name searching features to combine similar names on a single search report
  • High-quality data, purchased directly from the state filing offices
  • Print a similar name report for your file and keep track of name variations
  • Drill down on preliminary results using our sorting and filtering features
  • Instant UCC and lien search results with no rush fees
  • Use the system when you need it most  with 24/7 access to UCC and lien data and clear document images

For more information, check out the following blog posts and explore the benefits of using an online UCC and lien search system:

Not an FCS online user?
Find out more about our UCC Online Search System
Call or email today to schedule a free online demo: 800.406.1577 | info@ficoso.com

Tips for Effective UCC and Lien Searching

March 20, 2014

The simple purpose of UCC and lien searching is to minimize your lending risk by accurately informing your lending decisions. UCC and lien searching is not a black or white process, however; the quality of your search results plays a essential role in helping you to determine that risk. If for any reason your search results are inaccurate or incomplete, your effectiveness in mitigating your lending risk is diminished. Read on for tips to  help uncover hidden liens and those filed under critical name variations.

Online Searches

Online UCC and lien searching systems are a great tool for maximizing results. Proprietary search systems and even some state websites incorporate broad based searching features such as wildcard characters and truncated name searching that help reveal name variations. By using these features, searchers can draw similar names onto a single search report, for a single fee, and then review them in more detail to determine if they are items of interest.

See our previous blog post “Broad Based Name Searching? What is it? Why is it Important?” for more information on the power of broad based name searching in UCC and lien searching.

Manual/Offline Searches

Not all searches can be performed online; sometimes you will need to place your search request with a private service company who has access to the filing office records. Although the search is out of your hands in these situations, there are still ways you can maximize your results. One of the best ways to do this is to thoroughly vet your UCC and lien search provider before placing your request. Some service companies focus on name variations and maximizing results while others do not make this a priority. Make sure you communicate to your vendor that you are looking for similar names to be included in results.

Lastly, when ordering searches from a search company, be mindful of what special search instructions you include with your request. Asking a service company to limit results to a certain address, for example, will limit the scope of the results that are returned to you.

First Corporate Solutions is committed to uncovering name variations and locating involuntary and hidden liens in both our online search system and our manual search efforts. Contact us today for more information on search services: 800.406.1577 | info@ficoso.com

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Tips for Avoiding Rejection of Articles of Incorporation

March 13, 2014

Tips for Avoiding Rejection of Articles of Incorporation

In most states, filing articles of incorporation (or organization) is a simple process —document filers fill out a form, collect a signature and send the document off to be filed. Corporate filings get rejected often, however, and it is usually for errors that are easy to catch. Here are three easy tips to help guard against rejection of your business formation filings.

Check Name Availability
A new business must have a unique name. If your chosen name is the same or deceptively similar to an existing entity, the state filing office will reject your document. To assist you in choosing a unique name, most states will allow you to check the availability of the name you wish to use prior to submitting your paperwork. Then, if the name is available, you can reserve it for your exclusive use. Please refer to our previous blog post, “Why Reserve your Business Name?” for more information on name reservations.

Aim to Meet the Minimum Requirements
Another best practice is to aim to satisfy the minimum requirements for filing formation documents without elaborating or providing additional information. In some cases, providing too much information can be a cause for rejection. For example, while some states require officer and director information to be included in the articles, others will reject for its inclusion on the basis that the proper way to communicate officers and directors is on the statement of information or annual report form.

Follow Conventional Standards
If the state provides a fillable form for the type of document your need to file, read the instructions carefully. For some filing types, however, there are no special forms; some require filers to create their own formation document according to certain specifications. If this is the case, look to the state’s website for a sample of a drafted document. Don’t get too creative here. Whenever possible, draft your document using the same verbiage as the sample as many states have required statements that must be included verbatim to avoid rejection.

First Corporate Solutions customers work with a designated Account Manager with expertise in the filing of business entity documents. Our filing experts can provide you with the appropriate form or sample document and offer guidance on subsequent filing requirements. Contact us today to place your order at 800.406.1577 or info@ficoso.com.

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[On-Demand Webinar] The Basics of Lien Priority

March 6, 2014

It’s time to refresh your lien knowledge. Join us this week to learn more about lien priority.

The Basics of Lien Priority

Duration: 60 Minutes

Webinar Description
Mastery of lien priority is critical in today’s high stakes, fast-paced world of commercial transactions. Whether you’re new to the industry or an industry veteran, you won’t want to miss this presentation by Texas attorney Bradley B. Clark on lien priority.

Watch Now

Questions?
Contact First Corporate Solutions

Free Reference Materials
Visit our free reference library to download reference guides and other resource materials on UCC & corporate related topics. Also, you can visit our blog for more tips and tricks!

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