Equipment financiers limit exposure to UCC liens

Uniform Commercial Code lien filings present a challenge for equipment lenders and other secured parties due to legal issues and filing volumes. 

In fact, equipment financier C.H. Brown does not engage in private party transactions because of this, Business Development Director Kit West told Equipment Finance News, as it is difficult to prove ownership, and to find and obtain all liens released on those deals. 

“We limit our exposure to UCC filings by only doing financing for serial numbered equipment through a dealership,” West said. 

The sheer volume of UCC filings that occur each year contributes to the difficulties in identifying and then getting all liens released. 

For example, during fiscal 2024, the Texas Secretary of State’s Office, one of the largest for UCC filings, processed approximately 662,000 UCC filing transactions and 583,000 requests for information on UCC records, the office said in a report to the Texas Legislature in December 2024. More than 91% of filings and 96% of copy and certification requests were handled electronically. 

Once a customer pays off the equipment, Wheatland, Wyo.-based C.H. Brown leaves the process, West said. 

“When a borrower pays off a yellow iron serial-numbered piece, we release our UCC filings,” he said. “If there are blanket liens on the business, they automatically take our place in line.” 

Avoiding legal challenges 

UCC searches are critical for lenders and other parties who need to know the status of equipment and where their interest falls, Robert McHugh, transactional business consultant at legal software and service provider CT Corp., said during a March 18 webinar sponsored by Wolters Kluwer.  

“Secured parties are very interested in knowing whether they’re dealing with a high-risk debtor and where their security interest falls in terms of priority if the debtor goes under,” he said.  

By properly managing the transaction process and minimizing exposure to private party transactions, C.H. Brown mostly avoids UCC-related legal challenges, West said. 

“Usually, the only place a lien may be challenged is if it goes to court,” he said. “Since we do it this way, we have very few challenges.” 

The third annual Equipment Finance Connect at the JW Marriott Nashville in Nashville, Tenn., on May 14-15, 2025, is the only event that brings together equipment dealers and lenders to share insights, attend discussions on crucial industry topics and network with peers. Learn more about the event and register here.