a business man asking questions about UCC management
ComplianceFinanceOctober 12, 2017

With lien management, you have to ask some questions

Can't decide between an in-house lien management/lien perfection program or using an outside vendor?

You’re considering starting an in-house lien management/lien perfection program. Perhaps you’re wanting to do such a program to inventory all of your liens to determine your exposure, or perhaps you want to track when your UCC-1 financing statements are about to expire so you can renew the financing statements.

Why should you consider using an outside company for these tasks? Sure, you can manage and perfect liens on your own. You may be able to keep up with all of your liens in a notebook, or even on a spreadsheet. Is that really going to be your workflow? And is lien management really your purpose in life, or more importantly, business? Did you get into the loan business to perfect liens or to service your customers? Which of these are you the expert at doing?

Proper lien management and lien perfection contain many hidden pitfalls of which the amateur do-it-yourself-er is often not aware. These pitfalls can have serious and often costly consequences. For example, let’s take a closer look at seemingly simple UCC-1 or UCC-3 financing statement. Yes, it doesn’t look so tough to fill out, at first glance. However, were you aware that even the most innocent of mistakes — a common, everyday spelling error — could put your company’s assets at serious risk?

It’s true.

If you make a loan and misspell the debtor’s name in your UCC-1 or UCC-3 filing, it’s quite possible your lien could be declared not perfected. Should the debtor later encounter financial difficulty and have to go to bankruptcy court, having an unperfected lien due to a run-of-the mill typo means you could not only lose your place in the line of secured lenders, you could also lose most, or even all of the loan assets. That’s a steep price to pay for doing it yourself.

Here’s another important thing to consider for lien management and lien perfection: Did you know liens expire? Like a carton of milk, UCC-1 and UCC-3 filings have a limited shelf life. Each has an expiration date (five years). If you drink from the expired milk carton, you’ll be left with a bad taste. But if you let your lien expire, as with the misspelling instance above, you’ll get a worse and more costly one. Your lapsed lien will become unperfected. If you fail to file a replacement, you risk being sent to the back of the creditor line, which means should the debtor encounter financial difficulty, you may recover little — or nothing.

When you handle lien management and lien perfection on your own, usually what you end up with is workflow paralysis, errors and confusion, and increased risk. Hardly seems worth the effort, does it?

After the previous examples of doom and gloom, here’s some good news: There is a better way. Instead of doing lien management and lien perfection yourself, let a professional handle these necessary and important chores for you.

There are several reasons why you would want to use a lien management/lien perfection company to help you secure your valuable loan assets. A lien management/lien perfection company’s primary business is lien management/lien perfection. They’re the experts. As you’re a pro at loaning money and equipment to your customers, a lien management/lien perfection company is full of professionals at these important tasks. They know the pitfalls and ways to help you successfully avoid them.

  • A lien management/lien perfection company has the tools to get the job done right the first time. Unlike a do-it-yourself-er, the pros don’t track and manage liens on a spreadsheet or worse, in a notebook or index cards. They deliver powerful, up-to-date electronic applications and Web-based tools to make management and perfection easier, faster, and more accurate. This improves your workflow and enables you to rest easy, knowing your liens are perfected and your assets secured.
  • With a professional lien management/lien perfection system in place, you won’t have to continually re-key information. This eliminates the risks of filing errors that put your liens at risk. You’ll also be able to keep up with changes to your liens through convenient Monitoring features that ensure your filings are always current.
  • You’ll also be able to determine how many other liens this debtor has against them and receive alert when borrowers try to terminate their liens. Through features like Auto Continuation, you’ll be ahead of the curve when it is time to renew your outstanding liens, ending the chance you can lose assets from expired filings.
  • Finally, you’ll have all of your lien information in one central, easy-to-use location. You can instantly know with a simple click of a button how many liens you have out and to how much risk you are exposed.
So, when you weigh the costs in time, money, and effort, is it really worth it to do lien management and perfection yourself? Or is this one of the times when, “If we want something done right, maybe we ought to call the professionals”?

What to do next ...

Read our white paper on How to Choose the Right Vendor. Learn more about third-party searches by reading our paper on Unsure About Using a Third-party for UCC Searches?

Is lien management right for you?

If you’ve asked yourself that question and determined that it is, there are many companies that can help. Lien Solutions has nearly 40 years of experience aiding businesses just like yours improve workflow, manage lien portfolios, and reduce risk. Our automated solutions enable you to make informed decisions and sleep better at night. If you would like to learn more about our capabilities, we have a team of dedicated experts standing by to answer your questions and explain in greater detail the benefits of hiring a third-party lien management and lien perfection partner.

Alexis Jacobson Taylor is Associate Product Marketing Manager for Wolters Kluwer Lien Solutions. Taylor's responsibilities include leading efforts to market the company’s core product line to customers and prospects. She works closely with customers and explores ways to refine Lien Solutions products to better market the company’s offerings.

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