The UCC filing a factor puts on your receivables

A UCC-1 is one page of public record. It names the debtor, names the secured party, and describes the collateral. That is all it does, and it is enough to determine who gets paid first if things go wrong.

Why a factor files one

Even though factoring is structured as a purchase rather than a loan, factors file UCC-1s covering accounts receivable. Article 9 of the Uniform Commercial Code applies to sales of accounts as well as to security interests in them, so the filing is how the factor's ownership or interest is perfected and made public. The statute is at law.cornell.edu.

Without it, a later lender could search, find nothing, and take priority over the factor.

The distinction that matters most

A blanket filing from a factoring facility can block an equipment funder, a bank line, or an SBA lender later, because the next lender wants first position in its own collateral and will insist on a release or a subordination. Ask what the collateral description will say before you sign, and ask for it to be limited to accounts and their proceeds if that is all the facility touches.

Things worth knowing

Notification, and what your customer actually sees

A UCC filing is public but silent. What your customers receive is a different document: a notice of assignment telling them to pay the factor rather than you, usually with new remittance details.

In a notification facility that notice goes out at the start and your customers know. In a non-notification facility it does not, though the filing still exists and the factor normally keeps the right to notify. Read when that right arises, because "on an event of default" and "at the factor's discretion" are very different clauses.

Two consequences you will meet in practice:

Where the filing goes, and why the wrong state is a real problem

Article 9 locates a registered organisation in its state of organisation, so the filing belongs in that state's office regardless of where you trade or where your customers are. A Delaware LLC operating entirely in Georgia is filed in Delaware.

That matters twice. When you search your own record, search the state of organisation — a clean search in your operating state proves nothing. And if you have converted, re-domesticated or merged, filings can sit in more than one state at once.

How to check and clean up

1. Search your own name in your Secretary of State's online UCC database. It is free or close to it in most states.
2. List every filing: secured party, date, collateral description.
3. Identify stale ones. A filing from a facility you paid off years ago should have been terminated. It was not always.
4. Ask for a UCC-3 termination. The secured party files it. Get a written commitment on timing as part of any payoff, because chasing a terminated relationship for a signature is slow.
5. Do this before you apply for anything else. Finding a nine-year-old filing during someone else's underwriting costs you weeks.

A realistic timetable for getting a record clean

Payoff confirmation takes a few days. Then an authenticated demand for termination, and the statutory response period for non-consumer collateral, which runs to twenty days. Then filing and indexing, quick in some states and not in others. Then your next lender's search has to pick up the refreshed index.

Five to six weeks is a realistic allowance. Which is why the answer to "when should I start clearing old filings" is before you need anything, rather than during somebody else's underwriting.

The practical rule

A UCC filing is not a black mark. It is how secured commercial finance works, and a business with none has usually just never borrowed. What matters is that the filings on your record are accurate, are as narrow as the deals require, and are terminated when the deals end.