So a MCA just put a UCC on my business. What does it affect? It will mostly affect new lenders (they'll be behind the MCA funder), your customers (maybe they'll get notified of the UCC by the funder, if allowed under the contract or if you're in default) and your bank (no, the UCC filing alone can't freeze your account).
They put a UCC-1 financing statement on your business and it will be effective for five years under 9-515 of the Uniform Commercial Code ("UCC"), unless they file a continuation in the last six months of that term. Technically, MCA's aren't loans but a purchase of your future receivables, but the UCC says that sales of accounts are governed by Article 9 of the UCC. To check if there is a UCC on your business, see how to check for a UCC lien on your business.
How does an MCA UCC lien on my business affect new financing?
Primarily, any new lenders will be behind the MCA funder for any collateral that was put under the UCC lien. This is under section 9-322 of the UCC which says the creditor who files or perfects first is senior. So a bank that files after the MCA funder (especially on all assets) would be junior on your receivables and equipment, which most banks won't take.
Under the UCC there are ways around this (assuming for this post that you have a blanket UCC from the MCA funder):
| What you want to do |
Why the MCA UCC is an issue |
How to get around the MCA UCC |
| Get a loan or vendor financing on a piece of equipment |
The blanket UCC covers equipment you buy later |
Purchase money security interests can jump ahead of the MCA UCC lien when perfected upon or within 20 days after you take possession of the equipment under 9-324(a) of the UCC |
| Get a line of credit on your inventory |
The MCA funder filed their UCC first |
Purchase money security interests can still get ahead of the MCA funder if the new lender sends the MCA funder a signed notice before you take receipt of the inventory under 9-324(b) and (c) of the UCC |
| Get a factoring company or a bank line of credit on your receivables |
There is no purchase money security interest for receivables |
Have the MCA funder agree to be paid off at closing or have them agree to a subordination agreement or intercreditor agreement under 9-339 of the UCC |
Can the MCA funder contact my customers?
Only if agreed to in the contract or if you're in default, under 9-607(a)(1) of the UCC. Many MCA contracts have the business agree to the funder collecting, but the funder has to do it in a commercially reasonable manner under 9-607(c). This would also apply to your card processor since a right to payment arising from the use of credit or charge cards is an "account" under the UCC at 9-102(a)(2).
Once your customer gets a signed notice to pay the MCA funder, they can't pay you and get out of paying the debt under 9-406(a) of the UCC or in Pennsylvania 13 Pa.C.S. § 9406. However, your customers still have rights. A notice that doesn't reasonably identify the rights assigned is ineffective, and your customer can ask for reasonable proof of the assignment and keep paying you until the MCA funder provides it.
Can the MCA company freeze my bank account because of the UCC filing?
The short answer is no, a secured party cannot perfect a security interest in a deposit account originally as a UCC-1 filing, it must be perfected by control per UCC 9-312(b)(1). Even if they could, your bank would usually have priority, per UCC 9-327. And under UCC 9-341 your bank's duties to you don't change because of a funder's security interest or instructions unless the bank agrees in writing.
That said, customer payments deposited into your account can still be identifiable proceeds of the receivables per UCC 9-315. If the MCA company sued and got a judgment, it could use something like a New York restraining notice under CPLR 5222 for a period of one year to freeze your account. Before moving deposits to a new bank account, review our article on opening a new business bank account after a UCC Lien.
What should I do this week to fix this mess?
- Review the UCC-1 filing and the entire agreement with the MCA funders to see what they actually have a security interest in.
- Look for language letting them notify your customers or naming a designated bank account or card processor.
- Put a reminder on your calendar for five years from the date of the UCC-1 filing for it to lapse.
- If you are seeking new financing, use the table above before asking the MCA financier for a payoff letter or subordination.
- Do not take another advance that would stack another UCC-1 behind the first.
If the UCC-1 was filed without your authorization or if it stays up after it should have been removed, you can seek $500 in statutory damages along with any actual damages you suffered as a result per UCC 9-625. For terminating UCC-1s, see What is a UCC-1 and How do I Get it Removed. In Texas, as of September 1, 2025, H.B. 700 voids any confession of judgment in any commercial funding agreement and only permits automatic debits from providers that have a perfected security interest in your account that is first in priority. New York signed the FAIR Business Practices Act on December 19, 2025 which extends the consumer act to unfair or abusive practices that cause harm to businesses.
Frequently asked questions about UCC-1 filings with MCA funders
Does a no-assignment clause in my customer contract protect me?
Not likely. Per UCC 9-406(d), the clause would not be effective, so it won't stop the MCA company from notifying your customers.
Can I still pay my payroll, rent, and other vendors?
Yes. Per UCC 9-332(b), the parties you pay take the funds free of the MCA company's security interest unless they collude with you against it.
If I take a loan for inventory, will the new lender have to notify the MCA company?
Yes. Per UCC 9-324(b), to get priority in new inventory, the new lender must send a signed notice to any financier whose UCC-1 covers the same kind of inventory.
Do the liens ever go away on their own?
Unless the MCA financier files a continuation within the last six months of the five-year term, the UCC-1 will lapse in five years per UCC 9-515. A continuation extends it another five years. To remove it sooner, you will need to terminate it.