When a lender makes a loan to your business, and in the loan agreement takes a security interest (as collateral) in one or more of your assets, it may include a completed UCC-1 financing statement (UCC-1). A UCC-1 is a document that, when properly filed with the state (often the secretary of state’s office), provides notice to potential buyers of those assets, and notice to future creditors of your business that the earlier lender has a priority interest in those assets.

Article 9 of the Uniform Commercial Code governs business or commercial transactions (loans, extensions of credit) that are secured by collateral, and provides for use of the UCC-1 filing. Vehicles, office equipment and fixtures, inventory, investment securities, accounts receivable, machinery, letters of credit, and other moveable, tangible items of value often serve as the collateral for a UCC-1.

In North Carolina, when a lender provides a loan to a business and secures the loan with the business's assets, they often use a UCC-1 financing statement to establish their interest in the collateral. This document, once filed with the appropriate state office—typically the Secretary of State—serves as public notice that the lender has a priority interest in the assets listed as collateral. This notice is important for potential buyers of those assets and future creditors, as it informs them of the existing claims on the assets. The process is governed by Article 9 of the Uniform Commercial Code (UCC), which applies to secured transactions involving various types of collateral, including vehicles, office equipment, inventory, securities, accounts receivable, and machinery. Proper filing of a UCC-1 is crucial for lenders to maintain their priority in the event of default or bankruptcy of the borrower.