My clients are refusing to pay me because the Merchant Cash Advance company sent them a UCC lien letter.
What should I do?
First, it is important to understand what a UCC lien is. A UCC lien is a document that a lender files with your secretary of state which gives notice that the lender has a claim to certain assets as collateral. A UCC lien will typically prevent you from obtaining additional funding or selling property such as equipment, company vehicles, and materials.
But, if you default on a merchant cash advance contract, the merchant cash advance company will sometimes send these liens to your customers, demanding that your customers pay the merchant cash advance company directly rather than paying you. This is because the concept of a merchant cash advance is that the funder is purchasing your future receivables.
Merchant cash advance companies use these liens as weapons to coerce you into paying a debt that you may not even owe them. A UCC lien is supposed to be a shield, to protect the funder from businesses who take money and try to run away with it, without paying the funder back. However, if a merchant cash advance company claims that you have defaulted, even if you have not, the company can still make the same demand, using this lien as a sword rather than a shield.
Below are some common issues to look at when considering whether the UCC lien against your business is legitimate:
- Overbroad- Does the collateral named in the UCC lien relate to the contract you signed with the merchant cash advance company, or did the company claim much more collateral than you agreed?
- Unclear- When you read the collateral in the UCC lien, is it clear what collateral you have allegedly pledged?
- Unfair- What or how much collateral should you pledge for a merchant cash advance? Did the merchant cash advance company take collateral in everything your business owns?
Romaguera Law Group has experience fighting UCC liens asserted by merchant cash advance companies, and ensuring that your clients pay you what you are owed. Call us today for a FREE consultation and evaluation of your case.