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Payoff letter
Also called payoff statement, demand for payoff.
The funder's binding written statement of the exact amount required to retire an obligation, the date through which the figure holds, and where to send it.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
A usable payoff letter contains five things: the payoff amount, a good-through date, a per diem or daily accrual figure if the amount changes after that date, wire or ACH instructions, and language committing the funder to release its security once the funds clear.
The release language is the part that gets omitted and the part that causes problems later. A UCC-1 that stays on record after payoff makes the business look encumbered to every funder and bank that searches it, and getting a termination filed afterwards depends entirely on the goodwill of a counterparty that no longer has a commercial reason to help. Ask for the letter to state that a UCC-3 termination will be filed within a stated number of days.
Payoff letters are requested by the business, its counsel, or a competing funder with written authorisation. Most funders will not release figures to a broker without the merchant's signed authorisation, which is both a privacy position and a defence against brokers shopping their book.
Where this one catches people
A payoff letter that does not promise a UCC termination leaves the lien in place, and a lien that is paid but not terminated blocks the next funding just as effectively as an unpaid one. Confirm the release, and search the filing yourself thirty days later rather than assuming it happened.
Read next
Payoff letter — common questions
What does payoff letter mean?
The funder's binding written statement of the exact amount required to retire an obligation, the date through which the figure holds, and where to send it.
Where does payoff letter catch people out?
A payoff letter that does not promise a UCC termination leaves the lien in place, and a lien that is paid but not terminated blocks the next funding just as effectively as an unpaid one. Confirm the release, and search the filing yourself thirty days later rather than assuming it happened.
Is payoff letter the same as an interest rate?
Payoff letter is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does payoff letter apply to?
It is not specific to one product — it appears across the market.
Is there a worked example of payoff letter?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside payoff letter?
Payoff quote, Perfection, Refinance, Renewal, UCC termination.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.