Filing a Uniform Commercial Code financing statement makes it easier for businesses in two or more states to perform transactions and indicates that a loan is secure, according to About.com. A UCC loan transaction also creates a lien against a property, so the borrowing party can't sell the property before paying the debt.Continue Reading
A Uniform Commercial Code financing statement ensures that a business transaction is secure, and both parties must sign the document, explains About.com. Under state Universal Commercial Code statutes, when inventory, equipment or other business assets serve as collateral for a loan, the parties must file a UCC-1 financing statement. This process, often called "perfecting the security interest," makes it a secure loan.
The information on a UCC financing statement includes information about the collateral property and the names and addresses of both the debtor and the party holding the security, states About.com. One example of filing a Uniform Commercial Code financing statement is when a buyer purchases a car with a loan. The lender keeps the title and the UCC statement until the borrower pays off the loan.
The Uniform Commercial Code also covers contracts, equipment or vehicle leases, goods sales, investment securities, and asset liquidations and auctions. Real estate sales don't involve UCC transactions.Learn more about Credit & Lending