Regarding a UCC lien by a factoring company
I have a question regarding a UCC filing by a factoring company. I am looking to purchase a company with debt and when we did our UCC check we noticed that there was a first position on all assets. This is obviously not a good thing for me. Right now the company has, on balance, AR and work in process factoring. Both expected to be less than 55K by June. The most important thing is the first position issue. I can finance with my bank, no problem with that removed or amended. What are my options?
Thanks for your question. It sounds like a pretty interesting situation.
From the circumstances you’ve described, it sounds like you have 3 main options.
1. You can pay off the factoring company loans with cash and have the liens released when you close on your purchase, thus satisfying the conditions of your bank loan.
2. You can work with the seller of the company so that they pay off the factoring company loans and have the liens released, then adjust the purchase price as necessary.
3. Your best option is probably to look for an unsecured business loan that you can use to pay off the factoring company loans and have the UCC liens released. Some lenders don’t even require a credit check and, since the loan would be unsecured, the lender shouldn’t require a first position on any of the business assets. That should satisfy your bank and allow you to move forward.
If you would like more information on unsecured business loans, check out our article on the Best Unsecured Business Loans here: https://fitsmallbusiness.com/best-unsecured-business-loans/
If you think you may want access to a revolving line of credit, you might also check out our article on the Best Small Business Lines of Credit: https://fitsmallbusiness.com/best-small-business-line-of-credit/
Hope this helps. Best of luck with your acquisition.
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