A UCC lien refers to a lien that is perfected by following the requirements of the UCC, or Uniform Commercial Code. The UCC is a collection of standardized laws on the contracting and trade of goods that has been adopted by the majority of states in the U.S. A UCC lien usually results when an entity lends money to a debtor, and the debtor pledges collateral to the lender in exchange for the loan.
UCC lien is to secure a lender’s interest in repayment. A UCC lien, in this sense, is very similar to a mortgage, in which the lender obtains a lien on a house while in repayment.
Renewal and Terminations
The UCC provides that UCC-1 financing statements have an effective duration of five years. This means that if the financing statement is not renewed by the filing of a UCC renewal, the statement lapses and the lien becomes unperfected. This means that the lien may not be recognized if challenged in court by another lienholder or creditor of the small business. The lender must also file a UCC termination statement if the loan is paid in full. The termination statement gives notice that the lien is no longer effective.