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If you’ve started exploring financing options for your CPG brand, whether that's inventory financing, purchase order financing, or revenue based financing, there's a good chance you’ve come across the term “UCC filing” in the fine print. Most founders sign past it without fully understanding what they’re agreeing to. This guide breaks down exactly what a UCC filing is, how it affects your business, and what to look out for before you sign.
What is a UCC filing and why does it matter for CPG founders?
A UCC filing, or Uniform Commercial Code filing, is a legal notice that a lender files to formally claim an interest in your business assets as collateral for a loan or financing agreement. We can think of it as a lender planting a flag that says “if this borrower defaults, we have a claim on these assets.”
For CPG Founders, UCC filing is the most common financing tool in this space. This is because inventory financing, purchase order financing, or revenue based financing, are all asset backed in some way. While not all lenders require a UCC filing, the lenders who do need security, and a UCC filing is how they legally establish it. Understanding what you’re agreeing to before you sign helps you move forward with confidence especially as your brand grows and your financing evolves.
How does a UCC filing actually work?
When you agree to a financing agreement that includes a UCC filing, your lender submits a form called a UCC-1 financing statement to the Secretary of State in the state where your business is registered. This filing becomes part of the public record, which means anyone (including other lenders) can search it and see that a claim exists on your assets.
This process for filing is what lenders call “perfecting a security interest.” By filing publicly, the lender legally establishes their priority claim on the collateral listed in the agreement. It doesn’t mean they own your assets, it means they have a legal right to them if you default on the financing. This filing is active for five years and can be renewed if the financing agreement is still in place.
What assets can a lender put a UCC lien on?
The assets covered by a UCC lien are listed in the financing agreement and the range can be quite comprehensive.
Common categories include:
- Inventory
- Accounts Receivable
- Equipment and machinery
- Intellectual property, including trademarks and brand assets
- Future assets your business hasn’t acquired yet
That last one can surprise founders! Some lenders write agreements that are broad enough to include assets you acquire after signing. For a CPG brand, that could mean new product lines or new inventory. This is to verify strong, ongoing security through your financing relationship. Always ask your lender to specify exactly what is and isn’t covered before you sign.
Does a UCC filing hurt your business or your credit?
A UCC filing does not directly impact your personal or business credit score. It won’t show up on a credit report the way a missed payment would. However, it can affect your ability to secure additional financing while it’s active.
When another lender evaluates your business for a new deal, one of the first things they do is run a UCC search.Being upfront with potential lenders about your current financing relationships from the start is a great way to keep your options open as your CPG brand grows.
What's the difference between a blanket lien and a specific lien?
There are different types of UCC filings and the distinction between a blanket lien and a specific lien is one of the most important things a CPG founder can understand before signing.
A specific lien ties the lender’s claim to a defined asset or category. For example, a specific inventory order or a particular piece of equipment. If you default, the lender’s claim is limited to what’s named.
A blanket lien covers all your business assets, both current and future. This gives the lender the broadest possible protection and often makes it easier to qualify for larger capital amounts or more favorable terms. For founders working with a single primary lender, a blanket lien can be a straightforward path to accessing the financing you need.
Can you still get additional financing if a UCC filing is already on your business?
Additional financing depends on the lien and the lender. The lender who filed first holds what’s called first position, meaning they get paid first in the event of a default. The first position gets paid only on what their lien is tied to. (i.e. equipment lender would only have rights to the financed equipment). A lender who comes in after that holds second position or lower, which means more risk for them. Lenders offering larger capital amounts will often require first position. They may also work with you if the first-position lender agrees to a subordination agreement that adjusts priority order. Inter-creditor agreements are possible to divide the first position of assetsGaining this clarity from your vendor early on will keep your path moving forward smoother.
UCC filings are a standard sign that your business has real assets worth securing. Taking the time to understand how UCC filing impacts your CPG business puts you in the best possible position to make financing decisions that move your brand forward.
What happens when I am no longer working with a lender that has a lien on my business?
When you terminate a lending relationship, you should request a UCC-3 filing to confirm termination of the lien.
Lunr Capital provides non-dilutive inventory financing for emerging CPG brands scaling into retail. If you're an emerging CPG brand expanding into retail, Lunr finances your inventory so you can meet demand without giving up equity. Apply here or reach out at hello@lunrcapital.com.
What should CPG founders look for before signing a deal that includes a UCC filing?
What assets are covered?
Make sure you understand exactly what’s included in the lien so you're fully informed going in.
What triggers a default?
Understand the specific conditions under which the lender can act on their claim.
How long is the filing active?
UCC-1 filings last five years and can be renewed.
Will the lender commit to a termination timeline?
Get clarity upfront on when and how the lien will be released once you’ve fulfilled your obligations.
Does this affect other financing relationships you have or plan to have?
If you’ve already in conversations with other lenders, find out how an existing UCC filing will affect those deals.
Taking the time to work through these questions before sets you up for a financing relationship that’s clear, aligned, and built to support your growth.