A UCC-1 financing statement is a short public filing that announces a creditor's security interest in a business's property. It is the main way to "perfect" an interest in receivables under Article 9 of the Uniform Commercial Code.
How it works in factoring
The form itself is brief. It lists:
- The debtor's exact legal name and mailing address
- The secured party's name and address
- A description of the collateral
In factoring, the debtor on the form is the business selling its invoices, and the secured party is the factor. The collateral description usually names accounts and related rights; some factors file a broader description that covers all assets.
The filing goes to the central filing office of the state where the business is organized, often the secretary of state. Errors in the debtor's legal name can make the filing ineffective, so factors match it to the formation documents.
Once filed, a UCC-1 is generally effective for five years and can be extended with a continuation filed in the six months before it lapses. When the relationship ends and the obligation is satisfied, the secured party files a UCC-3 to terminate it.
What to check
- The collateral description, since a broad one can make it harder to get other financing
- Whether existing filings by other creditors need to be released or subordinated first
- Who will file the termination at the end, and when