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What is a UCC in Factoring?

A UCC, known as uniform commercial code, is a financing statement used between businesses who are lending and borrowing money.

Creditor vs Debtor

In the case of factoring, the creditor is the factoring company. The debtor is the carrier or trucking company. A debtor has to give creditors a stake in their business asset(s) because the debtor is technically borrowing money from the creditor. If a debtor owes a creditor money and fails to pay them back for any reason, such as going bankrupt, the factor can claim all or some of the carrier’s assets.

Types of UCCs

There are 2 types of UCCs relevant to the freight factoring industry.
1. Specific collateral: The factor has a stake in one or multiple of the carrier’s business assets, but not all of them. This filing is used for loans that pay for specific equipment, technology, or even a truck. If a carrier borrows money to buy a truck but fails to make payments, their factoring company can claim ownership of only that truck.
2. Blanket: A creditor with a blanket filing has a stake in all of the debtor’s business assets. This filing is more common when the debtor doesn’t have concrete assets when taking out a traditional business loan.

Effects on Your Business

Filing a UCC has absolutely no negative effect on your business, reputation, or credit score! The UCC will actually protect your business when you operate across states. Each state has its own laws that determine business transactions and protections, but the UCC will standardize the laws that apply to your business no matter what state you make those transactions in.

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