Is an MCA Secured or Unsecured?
Most merchant cash advances are sold as unsecured, meaning no house or equipment is pledged. In practice the funder files a UCC-1 financing statement on your receivables, and often on other business assets. That filing gives it a claim on the sales it bought and tells other funders it's there. So an advance is secured by your future sales, even if nothing else is pledged.
What does the UCC filing cover?
Read the security section of your contract. Some cover only receivables. Others list all business assets. Article 9 of the UCC covers sales of accounts too, which is why funders file even though they call the deal a purchase.
Does a personal guarantee put a lien on your home?
No. A personal guarantee is a promise to pay, not a lien on your house. To reach personal property, a funder first needs a judgment. The UCC filing covers the business assets it names, such as receivables and deposit accounts.
Why does it matter whether an MCA is secured?
- A second funder will see the filing and ask about it.
- After a default, the funder can notify your customers or processor to pay it directly.
- When you pay off, get a UCC-3 termination.
- More in UCC liens and MCAs.
How do you check what's filed against you?
Search your state's UCC database for your business's exact legal name. Each filing shows the secured party and the collateral it describes. Old filings from advances you've paid off can stay on record until someone files a termination. If you find one, ask that funder for a UCC-3 termination.
What should you ask the funder?
- What does your UCC filing cover?
- Will you file on all business assets or only receivables?
- Do you require a personal guarantee too?
- When will you terminate the filing after payoff?
Where can you check your own numbers?
The short version is in the Credit FAQ. To check the numbers on your own advance, use the funder fit checker.
Want a second look at your advance?
Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.