MCA funders routinely file UCC-1 financing statements claiming a blanket lien on every asset your business owns — and sometimes on assets belonging to companies you have nothing to do with. These UCC filings can freeze your ability to get bank financing, damage your business credit, and give the funder leverage they are not legally entitled to.

But many MCA UCC filings are legally defective, and you have the right to challenge and remove them.

How MCA Security Interests Work

When you sign an MCA agreement, you typically grant the funder a security interest in your business assets — often described as "all assets" including accounts receivable, equipment, inventory, and general intangibles. The funder then files a UCC-1 financing statement with the Secretary of State to "perfect" their security interest, establishing priority over other creditors.

This filing shows up when banks and other lenders run a UCC search on your business. It can: - Prevent you from getting bank loans or lines of credit - Block SBA financing - Make it harder to sell the business or its assets - Give the MCA funder leverage in collections

When UCC Filings Are Invalid

No Proper Security Agreement

Under Article 9 of the Uniform Commercial Code, a security interest only "attaches" — becomes legally enforceable — when three conditions are met:

  1. Value has been given (the funder advanced money — usually met)
  2. The debtor has rights in the collateral (the business owns the assets — usually met)
  3. The debtor has authenticated a security agreement describing the collateral (this is where problems arise)

If you never signed a proper security agreement — or if the "security agreement" is buried in fine print that does not clearly describe the collateral — the security interest never attached and the UCC filing is ineffective.

Unauthorized Filing (UCC §9-509)

A financing statement is only effective if the debtor authorized the filing. Under UCC §9-509, authorization typically comes from signing the security agreement. If you did not sign a security agreement — or if the security agreement you signed does not match what was filed — the UCC filing is unauthorized.

An unauthorized UCC filing can be challenged and removed. You can demand that the filer terminate the filing, and if they refuse, you have legal remedies.

Third-Party Assets: The Blanket Lien Overreach

This is one of the most abusive MCA practices: the funder includes assets of a company that is not a party to the MCA agreement. For example:

The Blaze Transportation scenario: An MCA agreement between a funder and JBSR Ventures LLC lists "Blaze Transportation Services, Inc." in Exhibit D as an "additional party" whose assets are subject to the security interest. But Blaze never signed the MCA agreement. Blaze is not a borrower, not a guarantor, and never consented to any lien on its assets.

Under both New York and Texas law, this lien on Blaze's assets is void and unenforceable because:

Simply listing a company in an exhibit to the MCA agreement does not constitute that company's authorization.

Texas Remedies for Wrongful Liens

Texas takes wrongful liens seriously. Under Texas Civil Practice & Remedies Code §12.002:

If the MCA funder filed a UCC-1 against your assets (or a third party's assets) knowing they had no valid security agreement, they face significant liability under this statute.

How to Remove an Invalid UCC Filing

Step 1: Demand Termination

Send a formal demand letter to the funder requiring them to file a UCC-3 termination statement within a specified deadline (10-14 days is reasonable). The letter should:

Step 2: File a UCC-3 Correction Statement

Under UCC §9-518, a debtor can file a "correction statement" with the Secretary of State indicating that the financing statement is believed to be inaccurate. While this does not remove the filing, it puts searchers on notice.

Step 3: Seek Court Order

If the funder refuses to terminate the filing, you can:

Step 4: File Regulatory Complaints

Report the unauthorized filing to: - Texas Attorney General — Consumer Protection Division - New York Attorney General — if the funder is based in New York - Federal Trade Commission — for deceptive business practices

The New York Attorney General has obtained judgments exceeding $1 billion against MCA companies for predatory practices, and the FTC has permanently banned MCA operators who seized unauthorized assets. Regulatory scrutiny is a powerful deterrent.

Impact on HB 700 ACH Restrictions

The validity of the MCA funder's security interest directly affects their right to make ACH debits under Texas HB 700. Remember: HB 700 prohibits ACH debits unless the funder holds a first-priority security interest.

If the funder's UCC filing is: - Invalid (no proper security agreement) — they have no security interest at all, and any ACH debits are unlawful - Junior (filed after another creditor's lien) — they do not have first priority, and ACH debits are prohibited - Unauthorized (filed against a non-debtor) — the filing is void and confers no rights

This creates an additional legal basis to stop unauthorized bank account debits.

Protecting Third-Party Companies

If a funder has filed a UCC lien against a company that never signed the MCA agreement:

  1. The third-party company has no obligations: It owes nothing to the funder and should not be affected by the MCA
  2. The lien is void ab initio: It never validly attached because the company never consented
  3. Texas §12.002 liability applies: The funder knowingly filed a lien without authorization
  4. Demand immediate termination: The funder must release the lien or face legal action

This article is part of the MCA Defense Guide. Call (469) 607-8552 for a free consultation.