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 South Dakota, as in other states, the process of securing a loan with collateral is governed by Article 9 of the Uniform Commercial Code (UCC). When a lender extends credit to a business and takes a security interest in the business's assets, the lender typically files a UCC-1 financing statement. This document is filed with the South Dakota Secretary of State's office and serves as a public notice that the lender has a priority interest in the assets listed as collateral. The types of assets that can be used as collateral under a UCC-1 filing include vehicles, office equipment, inventory, investment securities, accounts receivable, machinery, and other tangible items of value. The filing of a UCC-1 financing statement is crucial for lenders to establish and maintain their priority in the event of default or bankruptcy, as it alerts potential buyers and future creditors to the lender's secured interest in the assets.