A UCC-3 termination is a filing that cancels a UCC-1 financing statement, removing the public record of a creditor's security interest. The UCC-3 form is also used for other amendments, such as continuing a filing, changing the collateral or assigning the lien to another party.
How it works in factoring
When a factoring relationship ends, the business usually pays any outstanding advances and fees, and the factor collects or reassigns any remaining invoices. Once nothing more is owed and the factor has no further commitment to buy invoices, the factor should file a termination.
Under Article 9, if the secured obligation is satisfied and there is no commitment for future advances, the debtor can send an authenticated demand, and the secured party must then file or send a termination within a set period. A secured party that fails to do so can face liability.
Terminations are commonly coordinated with a payoff letter when a new factor or lender is taking over. The new financier wants assurance that the old lien will be removed once the payoff is funded.
What to check
- After any payoff, search the state UCC records to confirm the termination was filed
- Make sure the termination covers the right filing number
- Watch for partial amendments that release only some collateral when you expected a full termination
- Keep copies of termination filings with your corporate records
An old, unterminated lien can block new financing for months, so follow up promptly.